MARKET COMMENT
Mortgage bond prices fell last week pushing rates higher. In an announcement earlier in the month, Fed Chairman Bernanke indicated the timing of a global economic recovery was "highly uncertain." This uncertainty was reinforced last week as the economic turmoil continued across the globe and Spain joined Greece to become the second Euro zone country to have their debt downgraded by Standards and Poor's. A lower debt rating increases the cost to borrow further aggravating the attempts to fund the massive bailouts. For the second week in a row, interest rates on government and conventional loans rose by about 3/4 of a discount point.
The Fed meeting on Wednesday will be the most important event this week. Gross domestic product and employment cost index data Friday will also be important.
LOOKING AHEAD
| Economic Indicator |
Release Date and Time |
Consensus Estimate |
Analysis |
| Existing Home Sales | Monday, Jan. 26, 10:00 am, et |
Down 0.8% | Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates. |
| Leading Economic Indicators | Monday, Jan. 26, 10:00 am, et |
Down 0.1% | Important. An indication of future economic activity. Weakness may lead to lower rates. |
| Consumer Confidence | Tuesday, Jan. 27, 10:00 am, et |
38.0 | Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates. |
| 2-year Treasury Note Auction | Tuesday, Jan. 27, 1:30 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Fed Meeting Adjourns | Wednesday, Jan. 28, 2:15 pm, et |
No change | Important. Few expect the Fed to change rates, but volatility may surround the adjournment of this meeting. |
| Durable Goods Orders | Thursday, Jan. 29, 8:30 am, et |
Down 1.5% | Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates. |
| New Home Sales | Thursday, Jan. 29, 10:00 am, et |
Up 1.9% | Important. An indication of economic strength and credit demand. A decrease may lead to lower rates. |
| 5-year Treasury Note Auction | Thursday, Jan. 29, 1:30 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Q4 Advance GDP | Friday, Jan. 30, 8:30 am, et |
Down 5.0% | Important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, Jan. 30, 10:00 am, et |
None | Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates. |
| Q4 Employment Cost Index | Friday, Jan. 30, 10:00 am, et |
Up 0.7% | Very important. A measure of wage inflation. Weakness may lead to lower rates. |
FUNDAMENTAL WEEK
The abundance of fundamental data this week provides a good opportunity for mortgages to improve. If the data shows weakness in the economy then it is possible for mortgage bonds to rally resulting in mortgage interest rate decreases. However, if the data shows that the economy is rebounding or any significant signs of inflation, mortgage bonds may fall pushing mortgage interest rates higher.
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