In a word last week was "UGLY" for interest rates. We lost 31/32nds (on Fannies) last week which is a huge loss and VERY noticeable on rate sheets. It makes our jobs lotsa fun when you consider that FHLMC just release "lowest rates ever" report on Thursday. What most people do not realize is that that weekly number is already a week old when reported and mortgages are like stocks, they are traded all day long on the secondary market and the price drives the yield.
I figured we were due for an up week after over a month of improving weeks. Profit taking alone would have been a good enough reason. Ultimately it was the employment report that was the excuse to take profits at the end of the week with the employment report (while still ugly) came in much better than expected and there were some revisions to previous reports which seem to point towards the bad not being as bad as the market originally thought.
This weeks calendar has quite the list to chew on:
- MondayDecember 7: (don't forget it's Pearl Harbor day)
- Monday: Bernake spoke at a luncheon in DC... The Fed Chair is like EF Hutton, he talks and people listen. This was a bit of a non event and the market ended up happy for the day as we gained back about a days worth of bad from last weeks "fun".
- Tuesday December 8: Treasury auctions $40 Billion worth of 3 year notes. The short term "stuff" usually goes quickly as a place to safely park money with out fear of near term inflation. Hopefully this is the case with this auction. (more below)
- Wednesday December 9: October Wholesale Inventories expected -0.5%. October is so YESTERDAY! stale news usually doesn't move the markets.
- Wednesday: Auction number 2 with $21 Billion in 10 year notes. This one being longer term could be significant and show what the investment communities outlook is for the economy. If they see it as improving it could help to drive interest rates up on us.
- Thursday December 10: Initial jobless claims expected up 3,000. Not a likely market mover
- Thursday: Third auction of the week with $13 Billion in 30 year bonds. If this one is poorly bid it will put a bit of pain into the mortgage market.
- Friday December 11: November Retail Sales expected +0.6% ex auto +0.4%. as forecast this report will support steady to lower rates, but if we are surprised by a strong number here it will be bad news for rates since consumer spending is a huge percentage of our economy.
- Friday: October business inventories expected -0.3%. Another Stale number that is not a market mover.
I think we have said enough about last week... so looking forward to this week I think the smoking gun will be the Auctions. If investors truly believe (as they seemed to last week) that the economy is improving... it will be difficult to see successful auctions without the yield being pushed up. After all, would you invest money for the long term at low rates if you thought rates would be going up? The Fed is no longer buying Treasuries, that along with last weeks good news is potentially a scenario for higher rates this week. We will just have to wait to see what investors are truly thinking based on the participation in the auctions.
Have a great week.
Rob
Mortgage Banker
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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