Mortgage Market Review - 2/16/10

This Morning…Monday, February 16, 2010:
Tuesday’s bond market has opened in negative territory due early gains in stocks. The stock markets are kicking-off the holiday shortened week with noticeable gains. The Dow is currently up 50 points while the Nasdaq has gained 7 points. The bond market is currently down which has pushed mortgage rates slightly higher.

Last Week:
Mortgage bond prices fell last week pushing mortgage interest rates slightly higher. The early part of the week saw a reversal of the recent flight to quality buying of US investments as talks hinted of a Greek bailout by Germany. German Chancellor Merkel dashed those hopes late in the week causing turmoil in the European Union. As a result global investor funds returned to the US bond market. Rates improved Friday morning, which helped recover some of the earlier losses. Unfortunately rates still rose overall for the week by about 1/8 of a discount point.

This Week:
This week, the most significant economic data are the PPI and CPI siblings: the monthly inflation reports. The Producer Price Index comes out Thursday, and the Consumer Price Index comes out Friday. Besides those, we have little of importance today. Tomorrow we have Housing Starts and Building Permits, Industrial Production and Capacity Utilization, along with the FOMC Minutes from the January 27 Fed meeting. Throw in some Import Prices tomorrow, Leading Indicators, Jobless Claims, and the Philly Fed Thursday, and we have a pretty busy and potentially volatile week.

EconomicIndicator
Presidents Day
Monday, Feb. 15

Important. Extended holiday weekend may result in volatility when trading resumes Tuesday.
Housing Starts
Wednesday, Feb. 17,8:30 am, et
Up 0.4%
Important. A measure of housing sector strength. Weakness may lead to lower rates.
Industrial Production
Wednesday, Feb. 17,9:15 am, et
Up 0.8%
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Capacity Utilization
Wednesday, Feb. 17,9:15 am, et
72.2%
Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
Producer Price Index
Thursday, Feb. 18,8:30 am, et
Up 0.7%,Core up 0.1%
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Leading Economic Indicators
Thursday, Feb. 18,10:00 am, et
Up 0.5%
Important. An indication of future economic activity. Weakness may lead to lower rates.
Philadelphia Fed Survey
Thursday, Feb. 18,10:00 am, et
17.5
Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
Consumer Price Index
Friday, Feb. 19,8:30 am, et
Up 0.3%,Core up 0.2%
Important. A measure of inflation at the consumer level. Lower figures may lead to lower rates.


Market Forecast:
Overall, the most important day of the week will likely be Friday with the very important Consumer Price Index being released, but Thursday may also be active days for mortgage rates due to the Producer Price Index being posted. We also cannot forget about tomorrow’s FOMC minutes as they may be a non-factor but also have the potential to heavily influence the markets and mortgage pricing. In other words, be prepared for an active week in the markets and mortgage rates.

Some Humor:
An Amish boy and his father were in a mall. They were amazed by almost everything they saw, but especially by two shiny, silver walls that could move apart and then slide back together again.
The boy asked, "What is this Father?"
The father (never having seen an elevator) responded, "Son, I have never seen anything like this in my life, I don't know what it is!"
While the boy and his father were watching with amazement, an overweight old lady in a wheel chair moved up to the moving walls and pressed a button.
The walls opened and the lady rolled between them into a small room. The walls closed and the boy and his father watched the small circular numbers above the walls light up sequentially. They continued to watch until it reached the last number and then the numbers began to light in the reverse order.
Finally the walls opened up again and a gorgeous 24-year-old blond stepped out.
The father said quietly to his son....."Go get your mother."

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