Mortgage Market Review - 4/5/10

This Morning…Monday, April 5, 2010:
Monday’s bond market has opened in negative territory following early stock gains. The stocks markets are reacting favorably to Friday’s data as they were expected to do. The Dow is currently 54 points while the Nasdaq has gained 22 points. The bond market is currently down 5/32, which will likely push this morning’s mortgage rates higher.

Last Week:
Mortgage bond prices fell again last week pushing mortgage interest rates higher. The Fed ended the mortgage backed securities purchase program last Wednesday. There was no coincidence that rates spiked higher Thursday morning with the Fed no longer there to buffer negative movements and keep rates in check. Stock strength also pressured bonds as the Dow approached the 11,000 mark. Escalating oil prices also caused rates to spike higher as inflation fears begin to increase. Fortunately the PCE Price Index data came in as expected. By the end of the week, we saw interest rates up about ¼%.

This Week:
There is not a not due for this week after last week's plethora of economic data. Today we have an ISM Services number (up in February for the 2nd month in a row, but expected to drop a little) and Pending Home Sales. Thursday we have Initial Unemployment Claims, and Friday a Wholesale Trade number. The only "important" 8:30AM EST number is on Thursday with Initial Claims! Markets will also concentrate on the demand for Treasury auctions on Tuesday, Wednesday and Thursday. Two weeks ago, the last dip into the pool, Treasury auctioned notes that were not as well bid as they had been for the past year when demand was strong for US debt. The less than expected demand is one of the elements behind the recent spike in interest rates.

EconomicIndicator
3-year Treasury Note Auction
Tuesday, April 6,1:15 pm, et
None
Important. $40 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Fed Minutes
Tuesday, April 6,2:00 pm, et
None
Important. Details of last Fed meeting. Volatility may surround the release.
Consumer Credit
Wednesday, April 7,8:30 am, et
Up $1.6 billion
Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates.
10-year Treasury Note Auction
Wednesday, April 7,1:15 pm, et
None
Important. $21 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims
Thursday, April 8,8:30 am, et
430k
Moderately Important. An indication unemployment. Higher claims may lead to lower rates.
30-year Treasury Bond Auction
Thursday, April 8,1:15 pm, et
None
Important. $13 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates.

Market Forecast:
Overall, I am proceeding into this week very cautiously. There are several variables that could make this week very quiet or quite rocky for mortgage shoppers. Tomorrow’s FOMC minutes could very well be a major market mover or a complete non-factor. The same goes for the Treasury auctions. If foreign demand is lackluster like the last few auctions we could see that carry over to the mortgage bond market causing rates to spike. In other words, we may have a very calm week ahead of us, or we may see rates move noticeably several days. With no important economic data to drive trading and mortgage rates, bonds may move opposite of stocks. This means large stock gains could lead to bond selling and higher mortgage rates. But stock weakness could lead to mortgage pricing improving for the week. Watch the market closely and proceed cautiously.

Some Humor:
A man and his wife walked into a dentist's office.The man said to the dentist, "Doc, I'm in one heckuva hurry. I have two buddies sitting out in my car waiting for us to go play golf, so forget about the anesthetic and just pull the tooth and be done with it. We have a 10:00 AM tee time at the best golf course in town and its 9:30 already. I don't have time to wait for the anesthetic to work!"
The dentist thought to himself, "My goodness, this is surely a very brave man asking to have his tooth pulled without using anything to kill the pain."So the dentist asks him, "Which tooth is it sir?"
The man turned to his wife and said, "Open your mouth, Honey, and show him."

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