What Happened Last Week:
Uncertainty about an expected new Fed stimulus program created a lot of movement in mortgage rates during the week. Fed officials offered few details about the program, though. In the end, despite the volatility, the result was just a small decline in mortgage rates for the week.
In an effort to boost the economy, the Fed is expected to begin to purchase additional Treasury securities soon. The big question is how large the program will be.
Investors expect the Fed to reveal the details of the program at its next FOMC meeting on November 3.
Comments from Fed officials during the week indicated that they are still discussing what approach to take. The Fed may decide on a fixed quantity over a set time frame, or they may select a more flexible program in which they decide at each meeting how much to purchase.
Mortgage rates have already benefitted from investor expectations for the program, and they likely will remain highly sensitive to changes in the outlook for the Fed's plans.
While foreclosure issues were in the spotlight, last week's housing sector data generally showed modest improvement. September Housing Starts increased to the highest level since April.
The October NAHB Home Builder confidence index rose to 16 from 13 in September, which was the first increase in five months. "Builders are starting to see some flickers of interest among potential buyers," according to the NAHB.
What's Happening This Week:
It's a big news week with the potential to effect rates.
Existing Home Sales were released on Monday, up 10% but 19% down from last year at this time.
Tuesday: Consumer Confidence moved up to 50, Strong reading = 90, so this will help rates. Fed Chairman Dudley of New York spoke of the Fed's purchasing Treasuries saying: "Fed's job is not massive action, but minor adjustments", hiting at the level of Fed particpation.
Case Schiller Home Prices up, but not as good as last month.
Corporate earnings were down today.
Wednesday: Durable Orders, an important indicator of economic growth, will come out on Wednesday. New Home Sales will also be released on Wednesday.
Friday: Third quarter Gross Domestic Product (GDP), the broadest measure of economic growth, will come out on Friday. The Chicago PMI national manufacturing index is also scheduled for Friday. Consumer Confidence and Consumer Sentiment will round out the Economic Calendar.
In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday, and there will be a G20 meeting taking place over the weekend. Investors also may be looking ahead to the hugely important first week in November, which contains the Fed meeting, the election results, and the monthly Employment report.
Copyright @ 2010 MBSQuoteline, XINNIX with additional commentary by Mary Anne Daly