Last week was the third week in a row of steadily climbing rates. Fannies lost 14/32ndsfor the week. This steady trend up seems to indicate that the world issues are no longer flowing funds into our credit markets in the same fashion we saw a while back. Considering the rebound in stocks and the lack of any real data last week it makes me wonder if that flight to quality may be over?
This week is the polar opposite of last week with a LOOOONNNNNG calendar of economic data and auctions to contend with, here is this weeks calendar:
- Monday April 11: By the end of the day Mortgage Backed Securities Roll to a May Delivery date. This happens every month, and quite often we get caught off guard with a bump up in rates that seem to come out of no where.... As of noon Fannies were up slightly.
- Tuesday, April 12: Auction #1 for the week with $32 Billion in 3 year notes. These yields are at a 6 month high. Combine the high with the short term nature of this offering and it should equate to a well bid auction and be supportive of steady rates.
- Wednesday, April 13: March Retail Sales expected +.5% Ex Auto +0.7%. If the actual numbers come in close to the estimated numbers this will actually be down a bit from the previous month and be supportive of steady rates, but there is always a risk of a stronger than expected report that would put some upward pressure on rates.
- Wednesday: February Business inventories expected +0.8%. Not only is this old news, but it will likely be over shadowed by the retail sales report, so not a market mover.
- Wednesday: Auction #2 with $21 Billion in 10 year notes. Word on the street is that this is expected to be well bid, especially since we have seen rates climb a bit over the past few weeks. This one does scare me a bit since it is in direct competition for the MBS world... so be cautious.
- Wednesday: Federal Reserve Beige Book Released. This is a pretty (boring beige) package of all 12 Fed Districts compiled into one report, it is not likely that there will be any surprises here so there is a only a small chance that this will move rates in any direction.
- ThursdayApril 14: March PPI expected +1.0% with a core of +0.2%. With Gas prices so high it is not surprising that there is an anticipated 1% number here, but the core is at a manageable level for inflation that will be supportive of steady rates. If we do see a core higher than anticipated we will see rates higher by the end of the day.
- Thursday: Initial jobless Claims expected down 2,000 to 380,000. There has been slow improvement on the jobs front which is good news, just not great news yet... So this is not likely to scare the markets and we should see this be a market neutral event.
- Thursday: Another auction with $13 Billion in 30 year Bonds. Yields on this security are flirting in the 4.6% range which should be high enough for strong market participation from domestic and foreign investors. This will likely be supportive of steady rates.
- Friday April 15: March CPI expected in at +0.5% and a core of +0.2%. The core is the key here and the anticipated number is right in the sweet spot for "acceptable" inflation, but if it comes in any higher it could be bad news for rates.
- Friday: March Industrial Production expected at +0.6% and Capacity 77.4%. Capacity is still low, and not at levels that would spur inflation, in the wake of a busy week of data this is not a likely market mover.
I told you it would be a long list! Outside of the data we do have to keep an eye on stocks. The rebound in stocks over the past few weeks may signal some profit taking in the Equity markets which will be good news for interest rates if that does happen. As far as the calendar, I would keep a close eye on the inflation reports, especially CPI, second would be Wednesday's Retail sales, Each of these has the potential to move rates significantly if the estimated numbers are wrong. There is a lot of extra volume to chew through this week as well, but from what I am reading - this excess supply should not be a big issues at the current rates being offered.
Buy the end of the week I bet we see some bumps as the data and auctions make their way through the markets, but at the end of the week I think we might see things end up pretty flat.
That's this weeks 2 Cents!
Have a great week!
Rob
Mortgage Banker
NMLS ID# 248937
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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