Last week was the 5th week in a row of climbing rates. It was also the Worst week in recent history with Fannies loosing 53/32nds by the time the bell rang on Friday. Here's the fun part: There really wasn't any reason for it. The first 2 Auctions went off poorly, so that did not help, but we did see good bidding at Thursday's 30 year auction that helped Thursday be the only flat day of the week. The thing that created the sell off: The extension of the tax cuts. Pretty crazy when you think about it, it is not a new tax cut that will pump money into the economy and cause run away inflation. It is an extension of an existing tax cut that has been in place as the economy wallows with almost 0 inflation. Well the market has always traded more on rumors than fact, and that just helps keep things interesting.
This week has the usual inflation news along with some words from the FED:
- MondayDecember 13: A no news day with some buying back in the market and a slight improvement in rates.
- Tuesday, December 14: November PPI expected +0.6% with a core of +0.2%. It is reported that the bounce in the core rate is largely due to increase in car prices, after all they cant give them away forever, so even with the growth here it is not likely to move the market.
- Tuesday: November Retail sales expected +0.6% ex auto +0.6%. This is a good news number, so if it is exceeded it will put upward pressure on interest rates.
- Tuesday: The Fed's meeting opens and closes today with a post meeting statement expected at 2:15pm. While it is not anticipate that there will be any market crazy info released here, it is likely that the Fed will remind the world that things are not all better yet, and that employment is still too high and that we have not clearly seen sustainable growth. (This in an effort to calm down the sell off in the credit markets we have seen in the past month +)
- Wednesday December 15: November CPI expected +0.2% with a core of +0.1%. The core as forecast is friendly to steady rates...
- Wednesday: Industrial production for November expected +0.3% and capacity at 75%. the Capacity is the key here, prices will not be an issue until capacity climbs significantly, so this is not likely market mover.
- ThursdayDecember 16: Initial jobless claims expected down 1,000 to 420,000. Over 400k is still UGLY, so it is not likely this will be a good news report, so supportive of steady rates.
- Thursday: November Housing starts expected +5.97% and permits +1.4%. The Summer was SLOOOWWW... so this is a bounce back from the doldrums and is likely to be mostly multifamily starts with housing still being slow.
- FridayDecember 17: November LEI expected +1.1%. This one looks down the road at future growth and it is a good news number, so it is possible this one may not be good for rates, we may lose a little ground today unless this comes in weaker, but HECK, we want the economy to improve don't we???
Inflation is pretty much well under control, Heck- it is almost non existent in some sectors. Keep in mind that Inflation is the biggest enemy of the long term interest rate. For some reason traders seem to be afraid of inflation that sparked a significant sell off last week. Hopefully Bernake will take a line or two of the post meeting statement to remind traders of these facts to help stabilize interest rates and end the month long blood bath! Don't get me wrong, I don't think wee will see a significant drop again in rates, but I do think we deserve a little dust settling. In my eyes the market is a little over sold. That is typical at both ends, the market always seems to get caught in frenzies up and down and over does things.
So We are now starting to flirt with the 5's on a 0 point thirty year fixed rate, so while they are still at crazy low 4's it may be time to jump off of that fence and don't look back, you don't want to be kicking yourself for missing the boat after all!
Have a great week!
Rob
Mortgage Banker
NMLS ID# 248937
www.RobertRaufHomeLoans.com or my blog: http://activerain.com/blogs/rrauf
(732)223-1630 x102
Since 1987 I have been helping my clients fulfill their dream of home ownership!
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