Last week was yet another interesting week, both in the mortgage market and with my computer luck. The Fed was certainly out there buying MBS, having stepped up their net purchasing to over $33 billion, with plenty more expected as market forces try to drive mortgage rates higher. Just when it started looking like market forces would win, Ben in his shining armor came to the rescue and kept mortgage rates basically the same as the week ended.
We saw plenty of speeches, along with plenty of data, including the Fed favorite, the Personal Consumption Expenditures (PCE) index. Treasury Secretary Tim Giethner started the week off with the announcement of the Treasury’s program to remove toxic assets from financial institutions, including offering billions in low interest loans to private investors. As the data flowed, the housing market showed improvement, and mot of the economic data beat expectations signaling that the economy, while bad, is not as bad as expected. Inflation, on the other hand, did start moving higher again, though it is within the Fed’s target range.
This week will see more data that could shake the markets, including the Jobs Jamboree on Friday. We will also see more speeches during the week, but not much in Treasury Auctions this week, which is good. Here is the what lies ahead for the week…
- Monday: Elizabeth Duke Speech (11:30), Treasury Auctions (1:00)
- Tuesday: Case-Shiller HPI (9:00), Chicago PMI (9:45), Consumer Confidence (10:00), Charles Plosser Speech (1:00)
- Wednesday: MBA Purchase Applications (7:00), ADP Employment Report (8:15), ISM Index (10:00), Pending Home Sales (10:00), Crude Inventories (10:30)
- Thursday: Jobless Claims (8:30)
- Friday: Nonfarm Payrolls (8:30), Unemployment Rate (8:30), Average Work Week (8:30), Hourly Earnings (8:30), ISM Services Index (10:00), Donald Kohn Speech (11:00), Ben Bernanke Speech (12:00)
Once again, we see a very active week ahead and that usually means a lot of market reactions. The good news is that most of the data is focused on the economy, which remains weak, so unless the data continues to be higher than expected, mortgage rates should remain steady. Of course, should they attempt to move higher, the Fed has virtually limitless check writing capabilities.
On to the technical side of things. The charts paint a fairly favorable picture as mortgage backed securities hold above support layers and the general trend is slightly higher. Stochastic indications are turning positive, though they remain just below the overbought spectrum. There is a fair chance that the support layers will be retested this week, especially if data plays out unfavorably.
The bottom line for this week is that mortgage rates will likely remain steady overall, with movements both higher and lower as the week progresses. If any news or data surprises the market, mortgage rates could “pop”,though the Fed will be ready to jump in as they have been.
Seems like the FED has been buying up MBS for a long, long time now. Any idea how much of these toxic MBS they already have in their kitty by now? And what happens if, and when, they stop buying?
I would think were a long way from being done…
The Federal Government is keeping a constant eye on interest rates. They believe that sometimes even the smallest change in interest rates can or will cause the business owners and general public to react a certain way. The predicted reaction helps the Federal Government keep inflation from getting out of their control, because if inflation gets out of control, the economy could collapse and we could fall info a recession or depression.
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Karen Walter
Find out how and what determines interest rates and what information lenders use to get to the actual interest rate
Interest Rates for Mortgages
I always enjoy hearing your take on the market updates-thanks for sharing!
First off, thanks to all for your comments. The real reason I have come back to this one is regarding Karen’s input, which may lead people off of reality.
@Karen – The belief of the Federal Government is not necessarily accurate as to what really will happen and time has proven that. If people, even markets, reacted the way they expected, we wouldn’t be in the predicament we are in. Also, why say we “could fall into a recession or depression” when even the government states we are in a recession. Maybe you need to get up to speed on things.
Now, most importantly, you wrote the following:
“Karen Walter
Find out how and what determines interest rates and what information lenders use to get to the actual interest rate”
Well, I went to your website and it is full of misinformation. Sorry, but reality is reality and you have a lot to learn about what drives mortgage rates. I will admit there is some good info there, but it is buried in BS and I have to recommend people steer away from it so as not to be confused.
Thanks again to all and please keep providing your inputs. And to the spammers, I am watching as you may have noticed.
I would think were a long way from being done…