Mortgage Market Review - 6/28/10

This Morning…Monday, June 28, 2010:
This morning one can expect May personal income to rise 0.4% and for personal spending to be up 0.2%; the core PCE deflator is projected to come in at 0.1%. And so for economic news - today we have the Chicago Fed numbers, along with Personal Consumption and Income. It’s a busy week, so stayed tuned.

Last Week:
Last week was a pretty a good one for the rate markets, somewhat driven by the FOMC policy statement after the meeting on Wednesday and huge declines in home sales in May. Volatility in both the stock and bond markets remained high with broad swings occurring on a daily basis. Mortgage rates moved lower following the release of the weak housing data and the improvements seen earlier in the week were reversed following a weak 5-year Treasury auction on Wednesday. The volatility is expected to continue until the future of the economy becomes clear

This Week:
The data calendar is full this week with the main highlight being the June employment report on Friday. Tomorrow we have the S&P/Case-Shiller Home Price Indexes, and the Conference Board's Consumer Confidence stats. Wednesday some ISM numbers, Thursday Jobless Claims, ISM Manufacturing, and Pending Home Sales, but the biggest economic event next week will be the important Employment report on Friday. Early estimates are for a decrease of about 70K jobs in June.

EconomicIndicator
Personal Income and Outlays
Monday, June 28,8:30 am, et
Income up 0.5%Outlays up 0.1%
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
Consumer Confidence
Tuesday, June 29,10:00 am, et
62.
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
ADP Employment
Wednesday, June 30,8:30 am, et
+56K
Important. An indication of the employment. Weakness in payrolls may bring lower rates.
ISM Index
Thursday, July 1,10:00 am, et
58.8
Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
Employment
Friday, July 2,8:30 am, et
Jobs -70KUnemp @ 9.7%
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
Factory Orders
Friday, July 2,10:00 am, et
-0.6%
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.

Market Forecast:
Overall, Tuesday and Thursday’s data should bring some volatility in trading and mortgage rates, but Friday’s Employment report is definitely the most important of the week. Its impact can single-handedly lead to an improvement or increase in mortgage rates for the week. Next Monday is when the Independence Day holiday will be recognized. There is no early close for the bond market Friday ahead of it, but it will probably be a light afternoon in trading as traders head home for the long weekend. This could lead to additional volatility during morning trading, particularly with the Employment report being posted.

Some Humor:
A cruise ship suddenly hits rough waters and a huge storm. Lightening comes out of the sky and strikes the ship in half! There is only one survivor, a man, who wakes up on the shore of an island with its only other residents being a dog and a pig.

Months and months go by and after numerous days of watching the seas for help and the occasional smoke signals, no rescue. One day as the man is lying on the beach in the hot sun and starting to go a little nuts. He looks over at the pig and with the help of a little hallucinating the pig appears to be a beautiful woman. He crawls over towards the pig and as soon as he touches the pig the dog bites onto his ankle growling madly. He lets the pig go and the dog releases him. The man comes to his senses and thinks, “Holy Cow! What am I doing?” But over the next few months this happens a few more times: pig transforms into a beautiful woman, man grabs pig, dog snaps onto his ankle growling, man let's go of pig, dog releases the man and the man awakes from his daze.

One day he spots a cruise ship in the distance. He can't believe what he is seeing and is sure that it's another mirage. He starts a fire, sends smoke signals, and jumps up and down screaming! The boat sounds its horns and turns towards the island. Tragically, the ship hits a rock and sinks. He is devastated, but soon the man sees something floating out in the ocean. He swims out, and amazingly it's a beautiful woman. He brings her to shore, applies CPR and resuscitates her back to life. She sits up, stares into his eyes and tells him that after he has saved her life she will do anything for him. He replies "anything?" and she nods yes.

He jumps up an immediately says, "Do you see that dog over there? Can you please take him for a walk"?

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