Market Comment
Mortgage bond prices ended the week nearly unchanged despite considerable market volatility. Trading was up and down all week. Rates improved the first portion of the week as stocks fell below key psychological levels. Unfortunately a reversal the middle portion of the week eroded the earlier improvements. Data was mixed with tame inflation readings but generally stronger than expected economic activity. For the week, interest rates were near unchanged.
The Treasury auctions will take center stage again this week. If there is strong foreign demand it will likely spill over to the mortgage bond market. Weak auctions will likely result in mortgage interest rate increases. Employment cost index data will also be carefully watched.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Durable Goods Orders |
Tuesday, Oct. 27, |
Up 0.7% |
Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates. |
| Consumer Confidence |
Tuesday, Oct. 27, |
54.0 |
Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates. |
| 2-year Treasury Note Auction |
Tuesday, Oct. 27, |
None |
Important. $44 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| New Home Sales |
Wednesday, Oct. 28, |
Up 2.6% |
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| 5-year Treasury Note Auction |
Wednesday, Oct. 28, |
None | Important. $41 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Q3 Advance GDP |
Thursday, Oct. 29, |
Up 3.1% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| 7-year Treasury Note Auction |
Thursday, Oct. 29, |
None |
Important. $31 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Personal Income and Outlays |
Friday, Oct. 30, |
Unchanged, |
Important. A measure of consumers' ability to spend. Weakness may lead to lower mortgage rates. |
| Q3 Employment Cost Index |
Friday, Oct. 30, |
Up 0.5% | Very important. A measure of wage inflation. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment |
Friday, Oct. 30, |
70.0 | Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates. |
Existing Home Sales
Last week's existing home sales data shocked the market with a stronger than expected increase. Sales rose 9.4%, considerably stronger than the expected 5.5% increase. Some analysts attribute the surge in sales to the $8000 tax credit that is currently set to expire at the end of November. Lower home prices and historically low mortgage interest rates also factored into the increase. From a national perspective this is a positive report. However, the fact that some major metropolitan areas of the country failed to see improvements is an example of the axiom that real estate is local.
There is still uncertainty regarding the future state of the economy. Mortgage rates are great. Take advantage of them while that remains the case.
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