Mortgage Market Review - 2/8/10

Good morning. What a game yesterday! Even non football enthusiasts had to admit it was a good one. If you missed the ads, you can find ALL of them at http://superbowlads.fanhouse.com/?sem=1&ncid=AOLSPR00170000000009&otim=1265644718&spid=36198916. On a complete aside, a few days ago CNBC reported that it costs 2 cents to make a penny and 10 cents to make a nickel. Lastly, I thought that I knew what a bank was, until I saw this… http://uncyclopedia.wikia.com/wiki/Banker. Have a great week and please let me know if you have any questions. Thanks for taking the time to look this over. I hope you find it informative and useful.

Fred

This Morning…Monday, February 8, 2010:
Monday’s bond market has opened in negative territory despite a negative open in stocks. The Dow and Nasdaq are both showing early losses with the Dow and Nasdaq down. The bond market is currently down, which should keep this morning’s mortgage rates near Friday’s morning levels. It should be a generally quiet trade today unless there is a very big move in stock indexes.

Last Week:
Mortgage bond prices rose last week pushing mortgage interest rates just slightly lower. Reignited fear of a global economic meltdown sent money into the mortgage bond market in flight to quality buying. The news reports were permeated with worries about European debt payment defaults. Greece and a few other countries were noted as specific concerns. The employment report Friday morning was mixed with unemployment not as bad as expected (down 9.7% from 10.0%) but a larger than expected drop in payrolls.

This Week:
This week the government will auction a total of $81 billion in 3-year, 10-year and 30-year Treasury securities. Strong foreign demand will likely help the entire bond market. There is no economic news today, nor really any tomorrow of any consequence. Wednesday the 10th we will see some Trade Balance figures, and on Thursday Retail Sales (likely the headline figure this week), Jobless Claims, and Business Inventories. Friday we finish off the light week with the University of Michigan Consumer Sentiment Survey.

EconomicIndicator
3-year Note Auction
Tuesday, Feb. 9,1:00 pm, et
None
Important. $40 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Trade Data
Wednesday, Feb. 10,8:30 am, et
$35 billion deficit
Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
10-year Note Auction
Wednesday, Feb. 10,1:00 pm, et
None
Important. $25 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims
Thursday, Feb. 11,8:30 am, et
475k
Important. An indication of the employment situation. Higher claims could lead to lower rates.
Retail Sales
Thursday, Feb. 11,8:30 am, et
Up 0.4%
Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
Business Inventories
Thursday, Feb. 11,10:00 am, et
Up 0.4%
Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates.
30-year Bond Auction
Thursday, Feb. 11,1:00 pm, et
None
Important. $16 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates.
U of Michigan Consumer Sentiment
Friday, Feb. 12,10:00 am, et
74.6
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Market Forecast:
Overall, look for Thursday to be the most important of the day of the week due to the importance of the Retail Sales report. But, I suspect that we may see movement in mortgage rates several days this week. I am still holding a cautious approach stance towards mortgage rates and believe that the risk of floating a rate outweighs the potential gains.

Some Humor:
A Cajun who died went to hell.
The devil assigned him the usual punishment: he put him in the mass pit where the heat was melting others.
The devil came back sometime later surprised to find the Cajun just sitting around, not even misting, much less sweating. "How come you're not so much as sweating here where everyone else is screaming for relief from the heat?"
The Cajun laughed and said, "Man, I was raised in the bayous of Sout Looziana. Dis ain't nothin' but May in Lafayette to me!"
The devil decided to really put the Cajun through it. He put him in a sealed off cave in the pit with open blazes and four extra furnaces blasting.
When he came back, days later, the Cajun was sitting pretty, had barely begun to bead up with sweat.
The devil was outraged. "How is this possible!? You should be melted to a shrieking puddle in these conditions!"
The Cajun laughed even harder than before. "Hey, man! I done tole you. I was raised in Sout Looziana. You tink dis is heat?! Dis ain't nothin' but August in Jennings!"
So the devil thought, "Alright, a little reverse ought to do the trick." He put the Cajun into a corner of hell where no heat ever reached. It was freezing; and, to add to the Cajun's misery, he added massive icebergs and blasting frozen air. When he returned, the Cajun was shivering with ice hanging from every part of him; but he was grinning like it was Christmas.
Exasperated, the devil asked, "HOW!? How is it possible?! You're impervious to heat, and here you sit in conditions you can't be used to...freezing cold; and yet you're happier than ever. WHY?!"
The Cajun kept grinning and said, "Dis mean de Saints done won da Super Bowl?!!"

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