http://www.bainmortgage.com/MortgageMarketWeekInReview
| Newsletter-October 8th, 2012 |
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Provided by
Dana Bain & Robin Dunbar Bain
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Market Comment
Mortgage bond prices finished the week lower which pushed rates higher. Rates were quiet throughout the first portion of the week as euro zone weakness dominated the headlines. Stronger than expected data the latter portion of the week caused a spike in rates. Higher than expected ISM Index data started the negative trend. The biggest rate increases came Friday morning following the employment report. Unemployment came in at 7.8%, considerably lower than the expected 8.2% mark. This shocked the financial markets. Stocks extended their gains and mortgage bond prices fell which pushed rates higher. Mortgage interest rates finished the week worse by about 5/8 of a discount point as a result.
LOOKING AHEAD
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Economic
Indicator
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Release
Date & Time
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Consensus
Estimate
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Analysis
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| 3-year Treasury Note Auction |
Tuesday, Oct. 9,
1:15 pm, et
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None
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Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| 10-year Treasury Note Auction |
Wednesday, Oct. 10,
1:15 pm, et
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None
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Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Fed “Beige Book” |
Wednesday, Oct. 10,
2:00 pm, et
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None
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Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates. |
| Weekly Jobless Claims |
Thursday, Oct. 11,
8:30 am, et
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362k |
Important. An indication of employment. Higher claims may result in lower rates. |
| Trade Data |
Thursday, Oct. 11,
8:30 am, et
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$43.5b deficit
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Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| 30-year Treasury Bond Auction |
Thursday, Oct. 11,
1:15 pm, et
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None
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Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| Producer Price Index |
Friday, Oct. 12,
8:30 am, et |
Up 0.9%,
Core up 0.2% |
Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates. |
| U of Michigan Consumer Sentiment |
Friday, Oct. 12,
10:00 am, et |
76.8 |
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
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Stocks and Bonds Remain Volatile
Last week, mortgage interest rates rose sharply following the lower than expected unemployment figure. As the US economy moves along and world economies struggle, the demand for the lower yielding government-backed debt securities has whipsawed considerably. One day we see a flight to quality influx of investor funds, which drive prices up and rates down. The next day the inverse occurs.
The US stock market was on a roar the latter portion of the week at the expense of demand for mortgage-backed securities. As the stock market gained strength, investors sought higher returns by moving their money out of the bond market and into the higher yielding stock market. The whipsaw trading environment is likely to continue.
A cautious approach is necessary to protect against extreme short-term market volatility resulting in increased interest rates considering the improbability of accurately determining how the market will react on a short-term day-to-day trading basis. Taking advantage of the historically favorable interest rates at their current levels makes sense in this environment. We have seen in the last few weeks that lower rates are not always a given, even with the Fed spending $40b per month to buy mortgage-backed securities.
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MORTGAGE MARKET IN REVIEW |
Newsletter-October 8th, 2012 |
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