Mortgage Market Review - 9/8/09

This Morning…Tuesday, September 8, 2009:
By 10:00 this morning, after looking strong early in the futures trading, the stock market was still holding gains but has already backed off the best levels seen on the open at 9:30. Global markets all rallied overnight which led to the strong open. Treasuries are struggling a little this morning with the Treasury auctions this week. Not a lot of juice for the squeezer this week, making trade a little more precarious. Mortgage prices at 10:00 are generally unchanged this morning, but rates are higher than Friday’s.

Last Week:
Mortgage rates improved early last week then loss most of the gains on Friday. The gains came following some stock weakness, signs that unemployment may rise, and better than expected productivity. Increased productivity allows companies to produce more with the same labor input. This helps keep costs in check and alleviates inflation fears. Overall, mortgage prices improved fractionally on the week.

This Week:
For economic news, this is one of those weeks where there is not much. In fact, the Treasury auctions may have the greatest impact on mortgage rates this week with $70 billion in 3-yr, 10-yr, and 30-yr auctions today, tomorrow, and Thursday. Thursday we also have Jobless Claims and the Trade Balance figures, and on Friday some import & export price news and the Michigan Consumer Sentiment numbers. This week will finally have everyone back at their desks after two weeks of final summer holidays which may account for slightly less volatility.

EconomicIndicator
3-year Treasury Note Auction
Tuesday, Sept. 8,1:30 pm, et
None
Important. $38 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Consumer Credit
Tuesday, Sept. 8,3:00 pm, et
Down $4.0 billion
Low importance. A significantly large increase may lead to lower mortgage interest rates.
Fed "Beige Book"
Wednesday, Sept 9,2:00 pm, et
None
Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
10-year Treasury Note Auction
Wednesday, Sept 9,1:30 pm, et
None
Important. $20 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Trade Data
Thursday, Sept. 10,8:30 am, et
$27.0 billion deficit
Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
30-year Treasury Bond Auction
Thursday, Sept. 10,1:30 pm, et
None
Important. $12 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates.
U of Michigan Consumer Sentiment
Friday, Sept. 11,10:00 am, et
67.3
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Market Forecast:
The Fed "Beige Book" will be the most important data this week. The Treasury auctions will also set the tone for mortgage interest rates. Strong foreign demand could result in mortgage interest rates improvements.
There is a real threat that continued global economic turmoil might keep foreign investors from purchasing mortgage bonds in the future. The Treasury auctions this week will be important in determining the current appetite of foreign investors for dollar denominated securities. If this week’s auctions are poorly bid mortgage bond prices could fall pressuring mortgage interest rates higher.

Some Humor:
A Mafia Godfather finds out that his bookkeeper has cheated him out of ten million bucks. His bookkeeper is deaf. That was the reason he got the job in the first place - it was assumed that a deaf bookkeeper would not hear anything that he might have to testify about in court.
When the Godfather goes to confront the bookkeeper about his missing $10 million, he brings along his attorney, who knows sign language. The Godfather tells the lawyer, “Ask him where the $10 million bucks he embezzled from me is.”
The attorney, using sign language, asks the bookkeeper where the money is.
The bookkeeper signs back: “I don't know what you are talking about.”
The attorney tells the Godfather: “He says he doesn't know what you're talking about.”
The Godfather pulls out a pistol, puts it to the bookkeeper's temple and says, “Ask him again!”
The attorney signs to the bookkeeper: “He'll kill you if you don't tell him!”
The bookkeeper signs back: “OK, OK! You win! I will tell you, just don't hurt me. The money is in a brown briefcase, buried behind the shed in my cousin Anthony's backyard in Queens!”
The Godfather asks the attorney: “Well, what'd he say?”
The attorney replies: “He says you don't have the courage to pull the trigger.”

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