What an interesting week we had, with rates pushing lower, MBS pricing crossing their 200-day moving average, and things looking up, then wham, everything fell apart, followed by increased hope again. What major mood swings we are seeing lately and it makes you wonder what’s in store this week.
Last week saw the best news mortgage rates have needed in a long time, inflation being tame. I must say have remain skeptical about the numbers, but traders react on them nonetheless and mortgage rates headed lower as both PPI and CPI came in indicative of low inflation. But don’t expect that to hold as it essentially cannot with all of the government spending and, don’t forget the main reason for Thursday’s collapse, the Treasury Announcement of another influx of Treasury supply. Adding to that fact, the Fed has noticeably cut back their MBS purchasing, so unless something else manages to drive mortgage rates down, the Fed better be back in the game or else. Again, without dwelling to much on the past, news surrounding the economy was definitely mortgage bond friendly (for the most part), minus the Treasury Announcements.
The more important thing to discover is exactly where mortgage rates are headed, and this coming week will bring clarity in all likelihood. With The FOMC Meeting happening this week, along with the Fed’s favorite gauge on inflation, the Personal Consumption Expenditures Index (PCE), not to mention the actual Treasury Auctions that wreaked havoc on the markets last week, mortgage backed securities will be put to the test. Here is a rundown of the presently listed data and events…
Friday: Personal Income and Outlays (8:30), Consumer Sentiment (9:55)
Currently, there are no scheduled speeches, though that is likely to change as the week progresses. The two main events are clearly the FOMC decision and the PCE on Friday (included in the Personal Income and Outlays report). However, as we have seen in recent history, some other reports such as GDP and Consumer Sentiment have had increased effects on the markets, and the Treasury Auctions will surely have some impact as well. Remember that when the FOMC makes its announcement, don’t focus on their decision regarding the Fed Funds Rate, instead you should dissect what they are saying within the released Policy Statement.
Looking at the charts, you can see the uncertainty surrounding exactly what will happen with mortgage rates, though we will likely have a clear picture before the end of the week. MBS pricing has see-sawed back and forth across the 200-day moving average and is again testing as I write this report. By the end of the week, chances are we will see this level finally hold as resistance or support, the question being which one. Personally, I lean towards the resistance side, and that mortgage rates will again be climbing, but I cannot rule out the opposite at this exact moment.
Mortgage Market Update
by robert d. ashby on 22. Jun, 2009 in Mortgage Rates
What an interesting week we had, with rates pushing lower, MBS pricing crossing their 200-day moving average, and things looking up, then wham, everything fell apart, followed by increased hope again. What major mood swings we are seeing lately and it makes you wonder what’s in store this week.
Last week saw the best news mortgage rates have needed in a long time, inflation being tame. I must say have remain skeptical about the numbers, but traders react on them nonetheless and mortgage rates headed lower as both PPI and CPI came in indicative of low inflation. But don’t expect that to hold as it essentially cannot with all of the government spending and, don’t forget the main reason for Thursday’s collapse, the Treasury Announcement of another influx of Treasury supply. Adding to that fact, the Fed has noticeably cut back their MBS purchasing, so unless something else manages to drive mortgage rates down, the Fed better be back in the game or else. Again, without dwelling to much on the past, news surrounding the economy was definitely mortgage bond friendly (for the most part), minus the Treasury Announcements.
The more important thing to discover is exactly where mortgage rates are headed, and this coming week will bring clarity in all likelihood. With The FOMC Meeting happening this week, along with the Fed’s favorite gauge on inflation, the Personal Consumption Expenditures Index (PCE), not to mention the actual Treasury Auctions that wreaked havoc on the markets last week, mortgage backed securities will be put to the test. Here is a rundown of the presently listed data and events…
Currently, there are no scheduled speeches, though that is likely to change as the week progresses. The two main events are clearly the FOMC decision and the PCE on Friday (included in the Personal Income and Outlays report). However, as we have seen in recent history, some other reports such as GDP and Consumer Sentiment have had increased effects on the markets, and the Treasury Auctions will surely have some impact as well. Remember that when the FOMC makes its announcement, don’t focus on their decision regarding the Fed Funds Rate, instead you should dissect what they are saying within the released Policy Statement.
Looking at the charts, you can see the uncertainty surrounding exactly what will happen with mortgage rates, though we will likely have a clear picture before the end of the week. MBS pricing has see-sawed back and forth across the 200-day moving average and is again testing as I write this report. By the end of the week, chances are we will see this level finally hold as resistance or support, the question being which one. Personally, I lean towards the resistance side, and that mortgage rates will again be climbing, but I cannot rule out the opposite at this exact moment.
Tags: MBS Commentary