This report, as I sometimes do, is coming to you Sunday instead of the typical Monday morning. This time I am tired and need a break, so I am headed on a cruise (actually writing from the ship right now). Bonds will also get a much needed break, as Monday is a holiday and the markets will be closed, so we will have at least one positive day this week for sure.
I questioned whether to even rehash this last week as there is nothing more to say that I have not said before. In a nutshell, emotions overruled logic and bonds crashed 283 basis points from their high point, which was Monday. Mortgage rates are now considerably higher than they were and a “pretty picture” in the charts that started last week off is now uglier than ugly, with the only hope being a retracement period, at least for the foreseeable future.
So, why dwell on the crap and let’s get down to this upcoming week and see if we can find hope. Well, there may be some hope if we can get some data that begins to overthrow emotions and we do have some heavy hitters coming up, namely the CPI, Retail Sales, and the Philly Fed. There will be some other moderate impacters, so here is the breakdown of scheduled data…
- Monday: Holiday
- Tuesday: Take another break, maybe. News only.
- Wednesday: Retail Sales (8:30), PPI (8:30), Empire State Index (8:30), Beige Book (2:00)
- Thursday: CPI (8:30), Initial Jobless Claims (8:30), Industrial Production (9:15), Capacity Utilization (9:15), Philadelphia Fed Index (10:00)
- Friday: Building Permits (8:30), Housing Starts (8:30), Consumer Sentiment (10:00)
The biggest data day will be Thursday and since data has been bond friendly lately, maybe we can restore hope for lower mortgage rates this week. Emotions are strong, so it will certainly be a tough road.
Adding to the problem is the fact that bonds broke through several strong layers of support rather quickly this last week. That means bonds are almost certainly going to test their July lows, if not push even lower. With a 283 point drop already, the only good thing on the technical side is that a retracement has to be in the works, the only question being when.
For the week, look for added volatility (if that is possible), with the potential of a retracement giving at least a brief drop in mortgage rates. Beyond that, look for rates to reach at least their July highs, if not push even higher.
I will be on a cruise this week and hopefully “disconnected”, so my normal blogs, Florida Mortgage Daily and Florida Mortgage Report, will not be actively posting, but will resume next week. Have a great week.
Thanks for the update. I guess we can alwasy hope for lower rates but I think we all just need to hold on for the ride, rates are up up up
Taking a vacation is just about the ebst thing you can do now. Read an article in Bloomberg which says that people need to step back and let things happen. Even had some nice suggestions for where to go and hide.
Sorry, no lower rates this week — quite the opposite! I know it seems counter-intuitive with the economy screeching to a halt and inflation easing considerably, but ultimately, a debtor nation like the U.S. can’t just keep printing dollars to pay its way out of trouble. The more the U.S. government debt gets out of hand, the less people will be willing to pay for U.S. bonds, and of course, that creates upward pressure on interest rates.
Do you remember in the early 1980s when the “bond vigilantes” forced the government to get control of inflation? Well, the bond market once again may have to be the enforcer, driving interest rates higher until the government rediscovers fiscal discipline. I hope I’m wrong — I’m hoping people go back to focusing on the cyclical and inflation forces — but I’m guessing we are seeing just the start of the bill coming due for running up record government debt.
I agre with LING. We all need to step back from this mess. Take some time off from the loads of bad economic news. Everyone is so down. It doesn’t help anything. Happy thoughts! Successfull Thoughts!
Well, I am back to work and just posted this week’s update, but I wanted to thank you all for your comments and provide a little feedback as well.
VA – rates will likely keep going up as you mentioned, once the retracement is over.
Ling and Dylan – taking a break is a good thing every now and then, as is stepping back to let our emotions subside before making stupid decisions based on them, a move I wish more traders would exercise.
Richard – I agree with your analysis, but as we have seen in the last few days of trading, along with what I mentioned in this update, a retracement period needed to occur, which would present a brief period of “lower” mortgage rates. In the long run, rates will resume their climb in all likelihood, though I don’t think we will get to 1980s style rates. I would not be surprised if rates did make it to double digits on prime loans, however. Only time will tell for sure.
The mortgage market is stressful and sometimes confusing. It’s good to have updates to see what-if anything-we need to do.