What may move rates the first week of March?
Well the East coast got hit pretty hard with Snow last night into today... I know I took a snow day because there was no way my car was making it out of the driveway this morning with over 8 inches of snow and it was still falling into the afternoon.. In like a Lion, out like a Lamb?? lets hope! ... The Stock market also was hit hard today, dropping below the magic 7,000 mark for the first time since 1997. As the markets have been moving mostly based on troubles in the equities you would expect that to be good news for rates, but today it has been just slightly positive news for interest rates.
The beginningof the month always brings a slew of new numbers to digest. Here is this weeks calendar:
- MondayMarch 2: January Personal income, spending and PCE index. Expected -0.2%, +.0.4% and +0.1%. Their were no surprises in these numbers today, but it is nice to see spending increase a little, but unfortunately a lot of that number is an increase in the price of energy. overall this report is a benign one in terms of inflation
- Monday: February Institute of Supply Mgt, Expected 33.8. These numbers continue to be weak, and the previous numbers have been revised downward. But face it; it is not a surprise, we are officially in a recession after all. This is not a market mover.
- Tuesday, March 3: Fed Chairman Bernake Testifies to the Senate Budget Committee. His testimony is on the EconomicOutlook and the Federal Budget. This is likely to be more of the same from last week witha few small changes, It is not likely to draw much attention since it is a rerun from last weeks visits to both chambers of Congress. The one unknown here is the Q&A piece. It will probably be his responses to the questions that are looked at more than his actualy testimony.
- Wednesday March 4: February Institute of Supply Mgt, expected 41.0. This is a broad measure of February's Economic activity and the forecast is reasonable based on February's activity. This is not likely to cause rates to move either way.
- Thursday March 5: Revised fourth quarter Productivity and Labor costs, expected +1.5% and +3.4%. As forecast, the productivity being down vs the previous month is not a good thing for rates. You would expect costs up as there are layoffs and the workers left behind have to work longer hours to pick up the slack.
- ThursdayMarch 5: Initial jobless claims for week ending 2/28, expected Down 17,000. This is anticipated and is priced in, And it is not likely to move the market because tomorrow's number is the important one!
- Thursday March 5: Factory orders for January, expected -3.5%. Old news and fits the economic conditions... not likely to be even looked at by investors.
- Friday March 6: The biggie of the week; February Non Farm Payroll, Jobless Rate and Average hourly earnings. Expected -648,000, 7.9% and +0.2%. OUCH on the non farm number, that is a lot of jobs to lose in a month. Normally we would see a rally in the credit markets on this type of number, but I think it would take significantly weaker one to move the market. A little scary if the jobless rate pokes above 8%... Lets hope it doesn't.
This year the moves in the credit markets have been dictated by what is happening in the equity markets. Mortgages have not been able to rally with out cash flowing out of stocks in a flight to quality as the equity markets erode. That along with the increased debt load being taken on by Uncle Sam has been a dark cloud over the credit markets holding rates higher. As I have mentioned in previous posts, it is difficult to predict what will happen in today's world of the unknown. The safe gamble now will be to continue to lock at today's historically low rates and to not look back.
Over and above the calender here is my own personal concern: By the end of this week we should have details on the mortgage bail out plan... while this may still take some time to filter down to the market, you can bet that mortgage investors will be looking closely at the details... The fear here is that the plan will be so one sided and will make investing in Mortgage Backed Securities more risky. (IE: forcing investors to modify loans, principle reductions, interest rate reductions etc....) if this happens it may cause investors to flee the MBS markets which WILL raise rates... it is an unknown that I am worried about that is currently not being mentioned out there on the street.
That's this weeks 2 Cents!
Have a wonderful week.
Rob
www.RobertRaufHomeLoans.com or my blog: http://activerain.com/blogs/rrauf
(732)223-1630 x102
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