Mortgage Market Review - 4/26/10

This Morning…Monday, April 26, 2010:
Not much news today. Monday’s bond market has opened in positive territory despite a positive open for stocks. The Dow is starting the week off with a gain of 39 points while the Nasdaq is up 2 points.

Last Week:
Mortgage bond prices fell last week pushing mortgage interest rates higher. The first portion of the week had very little data. Leading economic indictors came in stronger than expected which really didn’t help us. Strong stocks pressured mortgage bonds a bit. Producer prices rose more than expected but the core rate was tame. New home sales shocked the market with a 26.9% increase. This was the largest increase in 47 years and not bond friendly. Rates rose by about ¼% by weeks end.

This Week:
This week presents us a mixed-bag of economic releases. Today we have Building Permits. Tomorrow we have the S&P/Case-Shiller Price Index, along with Consumer Confidence which is significant in that it provides a precursor into consumers’ willingness to spend in the months ahead (however, many analysts point out that willingness to spend does not always convert to actual expenditures). Wednesday is the Fed meeting and most expect that the Fed is seeing the same thing many are: slow but sustained economic growth, lagging consumer spending, tight credit, a muddling housing market, and little sign of inflation. The committee will likely conclude that conditions continue to warrant leaving rates “exceptionally low” for an “extended period.” mentioned above, Thursday is Initial Claims and the Chicago Fed numbers, and on the last day of April we have the GDP numbers, the Employment Cost Index, and Chicago Purchasing Managers’ numbers.

EconomicIndicator
Consumer Confidence
Tuesday, April 27,10:00 am, et
54.0
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
2-year Treasury Note Auction
Tuesday, April 27,1:15 pm, et
None
Important. $44 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
5-year Treasury Note Auction
Wednesday, April 28,1:15 pm, et
None
Important. $42 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Fed Meeting Adjourns
Wednesday, April 28,2:15 pm, et
No change
Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting.
Weekly Jobless Claims
Thursday, April 29,8:30 am, et
455k
Moderately important. An indication of employment. A larger figure may lead to lower rates.
7-year Treasury Note Auction
Thursday, April 29,1:15 pm, et
None
Important. $32 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Q1 Advance GDP
Friday, April 30,8:30 am, et
3.5%
Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Q1 Employment Cost Index
Friday, April 30,8:30 am, et
Up 0.4%
Very important. A measure of wage inflation. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment
Friday, April 30,10:00 am, et
72
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Market Forecast:
Overall, look for plenty of movement in the financial markets and mortgage some days this week, while others will probably be calm. Wednesday will likely be the most important day of the week with the FOMC adjournment, but we may see noticeable changes to rates Friday as the employment cost index and gross domestic product data are released. If this week’s reports reveal weaker than expected economic conditions, the bond market should extend its rally and mortgage rates should fall for the week. However, I recommend taking a cautious approach towards rates.

Some Humor:
A young monk arrives at the monastery. He is assigned to helping the other monks in copying the old canons and laws of the church by hand. He notices, however, that all of the monks are copying from copies, not from the original manuscript.
So, the new monk goes to the head abbot to question this, pointing out that if someone made even a small error in the first copy, it would never be picked up! In fact, that error would be continued in all the subsequent copies.
The head monk, says, "We have been copying from the copies for centuries, but you make a good point, my son."
He goes down into the dark caves underneath the monastery where the original manuscripts are held as archives in a locked vault that hasn't been opened for hundreds of years.
Hours and hours pass and nobody sees the old abbot.
So, the young monk gets worried and goes down to look for him. He sees him banging his head against the wall and wailing!!!
"We missed the R. We missed the R!!! We missed the R!!!!!!!!!"
His forehead is bloody and bruised and he is crying uncontrollably.
The young monk asks the abbot, "What's wrong, father?"
With a choking voice, the old abbot replies, "The word was ‘CELEBRATE'!!!!”

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