Mortgage Market Review - 6/1/10

This Morning…Monday, June 1, 2010:
Most rates improved a bit today as mortgage bonds attempt to continue making modest gains after Thursday’s losses. Both mortgages and Treasuries benefitted from early stock market weakness, although stocks have since made a recovery with the Dow now in positive territory, up over 40-points at the moment. As stocks improved bonds retreated, but have since regained some of the day’s gains with mortgages tightening in to Treasuries. Today’s economic releases showed manufacturing falling less than expected and construction spending up more than expected--not bond friendly data and the price action is not looking good as stocks appear to have some wind under their wings. This week brings the start of the month and a short trading week with the biggie jobs report on Friday. Stay tuned!

Last Week:
Mortgage bond prices fell last week pushing mortgage interest rates higher. The global economic turmoil continued with concerns about instability on the Korean peninsula. The Spanish government took over a regional bank, which added to the fray of an already battered Euro. The Chinese indicated they would not liquidate Euro bond holdings, which was a concern. Stocks continued to bounce up and down, as one hundred point swings were often the norm.

This Week:
It is a semi-busy week for news. Today (Tuesday!) we have Construction Spending (discussed above) and ISM (look for continued expansion with a number above 50), tomorrow is Pending Home Sales, Thursday Initial Claims, Productivity, Factory Orders, and then on Friday, as mentioned above, all the employment data. Tomorrow should be pretty quiet, but volatility will definitely increase as the week progresses towards Friday’s employment figures.

EconomicIndicator
Construction Spending
Tuesday, June 1,10:00 am, et
Up 0.1%
Low importance. An indication of economic strength. A significant decrease may lead to lower rates.
ISM Index
Tuesday, June 1,10:00 am, et
58.9
Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
ADP Employment
Wednesday, June 3,8:30 am, et
Up 50k
Important. An indication of employment. Weakness in payrolls may bring lower rates.
Revised Q1 Productivity
Wednesday, June 3,8:30 am, et
Up 3.6%
Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
Weekly Jobless Claims
Thursday, June 4,8:30 am, et
455k
Moderately Important. A measure of unemployment. Higher claims may bring lower rates.
Factory Orders
Thursday, June 4,10:00 am, et
Up 1.1%
Important. A measure of manufacturing sector strength. A larger decrease may lead to lower rates.
Employment
Friday, June 5,8:30 am, et
Unemp. @ 9.8%,Payrolls +500k
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.


Market Forecast:
Overall, Friday will likely to be the most important day of the week for mortgage rates with May’s Employment report being posted. The rest of the week’s data could also lead to noticeable changes in mortgage rates and we also need to watch for stock market volatility. I suspect this will be a fairly active week for rates, but most of the changes will probably come the latter part of the week.

Some Humor:
A couple was celebrating their golden wedding anniversary on the beaches in Montego Bay, Jamaica. Their domestic tranquility had long been the talk of the town. People would say, "What a peaceful & loving couple."
The local newspaper reporter was inquiring as to the secret of their long and happy marriage. The husband replied, "Well, it dates back to our honeymoon in America. We visited the Grand Canyon, in Arizona, and took a trip down to the bottom of the canyon, by horse. We hadn't gone too far when my wife's horse stumbled and she almost fell off."
My wife looked down at the horse and quietly said, 'That's once.'"
We proceeded a little further and her horse stumbled again. Again my wife quietly said, 'That's twice.'"
We hadn't gone a half-mile when the horse stumbled for the third time my wife quietly removed a revolver from her purse and shot the horse dead."
The man continued, "I shouted at her, 'What's wrong with you, woman?! Why did you shoot the poor animal like that, are you *%&#@$ crazy!?'
She looked at me, and quietly said, 'That's once.'
And from that moment we have lived happily ever after."

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