Mortgage Market Review - 6/21/10

This Morning…Monday, June 21, 2010:
Monday’s bond market has opened in negative territory following early stock strength. The stock markets opened the week with strong gains after news from China about their currency that was taken as extremely favorable for the international markets. The U.S. stock markets are following overseas strength with the Dow up 101 points and the Nasdaq up 14 points. These gains in stocks have pushed the bond market down and interest rates are slightly worsened this morning

Last Week:
Mortgage bond prices rose last week pushing mortgage interest rates slightly lower. Uncertainty in the Euro zone resulted in some flight to quality buying of US debt instruments. There were concerns that Spain could be the next economy to falter following the Greek instability. Most of the data showed a US economy that continues to struggle with little current price pressures. Weekly jobless claims were higher than expected and the consumer price data came in exactly as expected. Over the week, rates fell by about 1/8%.

This Week:
In terms of economic news, there is nothing today. Tomorrow we have Existing Home Sales, FHFA Home Purchase Index, and the Richmond Fed Index. Wednesday is New Home Sales, but later on we'll have the end of the Federal Reserve's FOMC meeting. (No matter how much the press wants to talk about the meeting, there will be no change to overnight rates, and little, if any, change to the actual announcement.) Thursday we have Initial Jobless Claims and Durable Goods. Friday is GDP, and the University of Michigan Consumer Sentiment Survey. And in order to finance activities of the US government, the Treasury will auction 2, 5 and 7-year notes beginning tomorrow. It’s a busy week.

EconomicIndicator
Existing Home Sales
Tuesday, June 22,10:00 am, et
Up 4.3%
Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
New Home Sales
Wednesday, June 23, 10:00 am, et
Down 4.8%
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Fed Meeting Adjourns
Wednesday, June 23, 2:15 pm, et
No change
Important. No rate changes are expected but some volatility may surround the adjournment of this meeting.
Durable Goods Orders
Thursday, June 24, 8:30 am, et
Down 1.4%
Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
Weekly Jobless Claims
Thursday, June 24,8:30 am, et
460k
Important. An indication of US employment situation. A higher figure should help rates.
Preliminary Q1 GDP
Friday, June 25,8:30 am, et
3.0
Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment
Friday, June 25,10:00 am, et
75.2
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Market Forecast:
Overall, it appears today may not be the quietest day of the week after all. We will likely see more volatility this week, particularly Wednesday afternoon when the first relevant Treasury auction is finished and the FOMC meeting adjourns. The same goes for Thursday with the week’s most important data being released during morning hours and the 7-year Note auction results are posted early afternoon. So, while today is an active day for rates, it probably will not be the only one this week. Proceeding with caution would be a wise move if still floating an interest rate.

Some Humor:
Two 90-year-old women, Vivian and Edith, had been friends all of their lives. When it was clear that Edith was dying, Vivian visited her every day. One day Vivian said, “Edith, we both loved playing women's softball all our lives, and we played it all through high school. Please do me one favor: when you get to Heaven, somehow you must let me know if there's women's softball there.”
Edith looked up at Vivian from her death bed, “Vivian, you've been my best friend for many years. If it's at all possible, I'll do this favor for you.”
Shortly after that, Edith passed on.At midnight a couple of nights later, Vivian was awakened from a sound sleep by a blinding flash of white light and a voice calling out to her, “Vivian, Vivian.”
“Who is it?” asked Vivian, sitting up suddenly.“
Who is it? Vivian -- it's me, Edith.”“You're not Edith. Edith died.”
“I'm telling you, Vivian, it's me,” insisted the voice.“
Edith! Where are you?
“In Heaven,” replied Edith. “
I have some really good news and a little bad news.“
Tell me the good news first,” said Vivian.“
The good news,” Edith said, “is that there's softball in Heaven. Better yet, all of our old buddies who died before us are here, too. Better than that, we're all young again. Better still, it's always springtime, and it never rains or snows. And best of all, we can play softball all we want, and we never get tired.”
“That's fantastic,” said Vivian. “It's beyond my wildest dreams! So what's the bad news?'
“You're pitching Tuesday.”

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