Mortgage Market Review - 8/24/09

Good morning all! I guess that the economy is not doing that badly if someone wants to pay $4.5 million for a gravesite. You can check it out on eBay, but the bidding started at $500k and has skyrocketed. The lady is selling the crypt out from under her dead husband, who is resting in peace above Marilyn Monroe, and will use the money to pay off her $1.6 million Beverly Hills mansion. According to the news, the lady has lived in her place for 50 years and just refinanced, has “somewhat recognized the fact that she’s going to run out of money in the next couple of years,” said Steve Miller, a real-estate broker and family friend who’s handling the sale of the crypt for the family. So there you go!!!! Let me know if you have any questions and thanks for taking the time to look this over.

Fred

This Morning…Monday, August 24, 2009:
There are no economic releases today, but this morning, mortgages are slightly improved after some deterioration on Friday. At 9:00, stock indexes were aiming for a better open, after a run of 156 points on Friday. Expect more volatility today as trading volumes remain very thin. With no data to think about the rate markets will move with equity market trading. Tomorrow Treasury will start the borrowing with $42B of 2 yr notes. Over the past two months Treasury has had little trouble selling new notes, demand from indirect bidders continues to be strong.

Last Week:
Mortgage bond prices fell last week pushing mortgage interest rates higher. Inflation data remained bond friendly with the Producer Price Index data coming in lower than expected across the board. Rates seesawed with stocks. Severe stock weakness last Monday helped mortgage bonds start the week on a positive note. Unfortunately, a stock rebound Tuesday erased Monday’s gains and this pattern continued throughout the week. Fortunately, the Fed continued to purchase billions of dollars of mortgage-backed securities in an effort to keep rates relatively low. For the week, interest rates rose about 1/8.

This Week:
The main focus this week for treasury and mortgage markets is Treasury auctioning $109B of notes (2 yr, 5 yr, and 7 yr). If signs of foreign demand falter, rates will likely suffer. Consumer confidence data may also move the market. Supply from Treasury generally keeps interest rates under pressure. Not only supply, but the stock market is playing against treasuries and mortgages as it continues to defy traders, technicals and fundamentals as it resists any sustained selling. Traders are being ripped up daily trying to short equity markets, with the high majority of market participants (including the most bullish) expecting a big retracement. It just won't happen as long as that is what is widely anticipated.

EconomicIndicator
Consumer Confidence
Tuesday, Aug. 25,8:30 am, et
48.00
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
2-year Treasury Note Auction
Tuesday, Aug. 25,1:30 pm, et
None
Important. 42-billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Durable Goods Orders
Wednesday, Aug 26,8:30 am, et
Up 3.2%
Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
New Home Sales
Wednesday, Aug 26, 10:00 am, et
390k
Important. An indication of economic strength and credit demand. A decrease may lead to lower rates.
5-year Treasury Note Auction
Wednesday, Aug 26, 1:00 pm, et
None
Important. 39-billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
7-year Treasury Note Auction
Thursday, Aug 27, 1:00 pm, et
None
Important. 28-billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Personal Income and Outlays
Friday, Aug. 28,8:30 am, et
Up 0.1%Up 0.2%
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
U of Michigan Consumer Sentiment
Friday, Aug. 28,10:00 am, et
64.8
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates

Market Forecast:
This week, the Treasury auctions will once again take center stage as record debt issuance continues. If signs of foreign demand falter, rates will likely suffer. Consumer confidence data may also move the market. Look for stocks to play a role as well.

Over the weekend at Jackson Hole; Bernanke and ECB Trichet were on the same page, saying the global economies are coming out of the deep recession. Not what the rate markets like as the outlook for a better economy will force interest rates higher. That said, I am not abandoning my outlook that the stock market will pull back in Sept and push interest rates to what will likely be the lowest we will see for the foreseeable future. Not sure how long and how deep the stock market will retrace, the deeper, the lower rate markets will go. The period between now and the end of the year may be the best and lowest mortgage rates in the next year. There is one huge wild card that stock markets have pushed well under the rug; the residential and commercial real estate markets. Consumers will have little appetite to increase discretionary spending as long as the housing markets are soft----and we expect them to be soft through the majority of next year.

Some Humor:
My neighbor found out her dog could hardly hear so she took him to the veterinarian. She found that the problem was hair in his ears! The veterinarian cleaned both ears and the dog could hear fine.
The vet then proceeded to tell my neighbor that if she wanted to keep this from reoccurring she should go to the store and get some 'Nair' hair remover and rub it in the dog's ears once a month. So my neighbor went to the drug store and gets some 'Nair' hair remover.At the register, the druggist tells her, “If you're going to use this under your arms don't use deodorant for a few days.”The lady says, “I'm not using it under my arms.”The druggist says, “If you're using it on your legs don't shave for a couple of days.”The lady says, “I'm not using it on my legs either; I'm using it on my schnauzer.”The druggist says, “Stay off your bicycle for a week.”

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