Should you lock or float? This has been the year of playing it safe and lock with out looking back since the moves in the market have not been predictable. This week is more of the same. The first issue is it is a holiday shortened week. Whenever we have a holiday shortened week we see thin trading and moves are typically amplified by the lack of volume. I have always felt that it is the "junior" traders left to man the desks while their bosses are away, and these Juniors are afraid that their bosses will yell when they get back... So they are conservative and are more apt to sell than buy. In the credit markets there is an inverse relationship between price and yield. More sellers equals a lower price and a higher yield.
Here is what we have in store for this week:
- Monday 8/25: July Existing home sales; expected up 0.8%. While one month does not equate to an upward trend, it does suggest that we may have hit a bottom. As I type this the report is already out at a much stronger than expected 3.1% due to Lower prices. The market took this in stride and is considered to be neutral.
- Tuesday 8/26: July New Home Sales; expected down 1.3%. Traders will look at this number and it is anticipated to be a hopeful sign that the problems in the housing world are fading. As typical, if the forecast matches we will see little move in rates if any. but a more positive number has the potential of raising rates. Given that the Existing home sales number was strong, there is a strong likely hood that new Homes will be strong as well, Look out for this one, it has potential for rates to rise.
- Tuesday 8/26: August Consumer Confidence; anticpated 53.0. Investors dont really put too much weight in this report. It is more the consumers actions rather than what they are feeling that is more important.
- Tuesday (busy day!): FED, FOMC minutes from 8/4-8/5. It is expected to reinforce the feeling that the FED will not raise rates anytime in the near future. Most likely just another place holder on the calendar.
- Wednesday 8/27: July Durable Goods; expected up 0.1%. likely another yawner... the uptick is due to aircraft orders and Autos responding to fuel efficient needs.
- Wednesday 8/27: Treasury auction $31 Billion 2yr notes. The Treasury actions this week are the highlight of the Calendar. Extra supply in thin trading will likely cause lower prices and higher yields
- Thursday 8/28: Second quarter GDP; expected up 2.7% This is a large revision to previous estimates and it is much stronger than initial numbers, but it should already be priced into the markets
- Thursday: Initial jobeless Claims; expected to be down 2,000. Not a market mover
- Thursday: Treasury Auction $21 billion 5yr notes. More supply again... not good this week!
- Friday 8/29: Personal Income, Spending and PCE; anticipated Unchanged, 0.2% and =0.3%. If any traders are still in on Friday it will be the personal Consumption number (PCE) that will be looked at. A stronger number here is likely to see rates rise.
- Market closes at 2pm Friday for the holiday
The Treasury Auctions will be the days to watch. The added supply in a thinly traded week is a recipe for lower prices and higher rates. Keep in mind that markets are closed on Monday while Foreign markets are open. Yet another reason for conservative trading this week.
Enjoy your last week of summer!
Rob
Real Estate Mortgage Network
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