Last week was a good one for interest rates, with Fannies gaining back 26/32nds by the close on Friday. The two "good days" were Tuesday which I attribute mostly to dust settling, and Friday where the employment report ended up weaker than expected which sparked a rally in the Credit markets. Remember: Bad news is Good news for interest rates.
This week is a pretty busy calendar of auctions, Data and Fed activity, here is how the week shapes up:
- Monday July 11: A no News day with Fannies taking direction from stocks, With stock selling off today we have an improving mortgage market which in turn leads to lower rates for our clients.
- Tuesday July 12: Auction number 1 of the week with the Treasury selling $32 Billion in 3 year notes. Here is a fun fact to worry about: The Fed ran out of stimulus money at the end of June, and this is the first auction with out stimulus money to pump into the system, so watch this one closely, the last few auctions had weak demand and if that demand is still absent along with no Fed monies to pump into the system, we will see sharp moves in rates.
- Tuesday: Minutes of the June 21st Fed meeting Released (2pm). Analysts feel the Fed is probably a bit more concerned about growth than they have been, (which is bad news).. If this comes out in the minutes than we can expect the credit markets to calm down a bit - keeping in mind that bad news is good news for interest rates.
- Tuesday: About closing time the MBSmarket moves to an August Delivery, This will often bump rates up a bit for no apparent reason since they move rates out a touch farther on the calendar. this happens every month, and it typically is a 3/8th adjustment to the points.
- Wednesday, July 13: Fed Chair Bernake presents to the House Financial Services Committee. At this point in time Bernake is pretty good at "fed speak" meaning he will be able to balance optimism and caution without scaring the markets. Investors worldwide will be listening in to see if they can determining what the Fed thinks about short term rates, the economic recovery and Job Growth, and what the Fed plans on doing in the event the economy continues to worsen... This is likely to be a non event at the end of the day, with some quiet trading leading up to the presentation.
- Wednesday: Auction number 2 with $21 Billion in 10 year notes. There is a good chance there will be upward pressure on rates due to this auction.
- Thursday July 14: Initial Jobless Claims expected down 3,000 to 415,000. Still above 400k, so supportive of steady rates.
- Thursday: June Producer Price Index expected -0.2% with a core of +0.2%. Fuel prices were down in June so that is why you see the difference in the headline V Core number. As projected this should leave us with a steady market on it's own, but if the core is higher than forecast, it will help to inch rates higher.
- Thursday: June Retail Sales expected 0.0% excluding Autos +0.1%. This is a weak one, so it is likely to be supportive of steady rates.
- Thursday: Bernake, part II but with the Senate Banking Committee. This is just a Do-over of Wednesday so it is highly unlikely there will be anything new.
- Thursday: Last auction of the week with$13 Billion in 30 year bonds. This one is just like Wednesday's 10yr auction, Highly likely to be poorly bid thus leading to higher rates.
- Friday, July 15: June Consumer Price Index expected -0.1% with a core of +.2%. Keep an eye on the Core, above .2% is inflationary, and Inflation is the biggest enemy of long term rates.
- Friday: March industrial Production expected +0.3% wit capacity 77.0%. Not only is the capacity well below any inflationary levels, it is also some very old news that the market is likely to ignore.
Heck this is a busy calendar! I think all eyes will be on the Fed this week and ultimately the Fed will not cause the market to move which is ultimately going to make this week's smoking gun: The auctions. The excess supply in uncharted waters of the Post Stimulus world is something we do have to pay close attention to, if the world markets do not have an appetite for US securities, it will cause rates to bump up. Outside of the Auctions PPI and CPI are potential movers, ESPECIALLY the CPI on Friday.
There is a lot for the market to digest this week, it will be interesting to see how things play out in a post stimulus world.
Have a great week.
Mortgage Loan Originator
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www.RobertRaufHomeLoans.com or my blog: http://activerain.com/blogs/rrauf
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Since 1987 I have been helping my clients fulfill their dream of home ownership!
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