Here is the Mortgage Market Update for the week of January 14, 2008 brought to you by Larry Iest of Hemet Mortgage.
LAST WEEK: Recap
Last week was another good week for mortgage rates and the bond market. The big event for the week was Federal Reserve Chairman Ben Bernanke speech on Thursday. He told the markets what they wanted to hear. He said, in so many words, the Fed recognizes there is slowing in the economy and they are willing to step in and cut rates further in needed to help the economy from sliding into a recession. In other big news for the real estate industry the rumors were confirmed that Bank Of America will buy the nations largest lender Countrywide for $4 billion. This will help stabilize Countrywide and prevent it from going into bankruptcy. With all of the volatility in the stock market the bond market ended the week higher improving mortgage rates slightly for the week.
THIS WEEK: Looking Ahead
The week ahead is packed with economic news. We are going to see reads on everything from consumer spending to inflation and manufacturing to housing. It all begins Tuesday with the release of December's Retail Sales data. This will be the first read on the results of the Holiday shopping season so all eyes will be watching this report. Also on Tuesday we will get the inflation reading for the manufacturing sector with the release of the Producer Price Index (PPI). Wednesday the Consumer Price Index (CPI) will be released. This report can have a big impact on the markets because it measures the level of inflation at the ever-important consumer level of the economy. This report will be even more interesting to see with all of the pressure being placed on the Federal Reserve for a rate cute at their meeting January 30. If the CPI shows inflation continuing to heat up it will be difficult for the Fed to cut rates by a large margin. The Fed's Beige Book will also be released on Wednesday. This contains the data the Fed used to set their monetary policy at the Federal Open Market Committee (FOMC) meetings. Traders like this information to try to ascertain what the Fed may do later this month at their meeting. All of this and we are only half way throw the week. Thursday we will get a look at the housing sector with Housing starts and building permit reports. Also we will peak into the manufacturing sector with the Philadelphia Fed Index. The Philly Fed Index measures manufacturing sector strength in the coming months.
With all of this data we are more than likely going to see some movement in the markets, especially if the reports vary greatly from the forecasts. Also we are in earnings season in the stock market. Big move is the stock market can also cause movement in the bond market and mortgage rates. Mortgage back securities have had a good run up this year (good for rates) and are ripe for a reversal. If any of this weeks data points to a strong economy or rising inflation that could be the catalyst for big movement down in the bond market (not good for rates). If we see tame inflation data and week retail sales we could see rates not seen since mid-2005.
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