Hey everyone, I am sorry for the delay but I am doing my recurrent flight training in Dallas, TX this week and had 9 hours of classes today. Hopefully all of you mortgage professionals have taken some time this year to improve yourselves through courses as education, even if just a refresher course, is the key to personal success.
Enough of that, let’s get into what happened last week, and even today. Things played out much like I suspected they would and if you re-read how I ended last week’s update and look at what happened, you already have a good idea of what lies ahead. Data last week showed that the housing market may have indeed hit bottom, inflation remains a non-issue and more Treasury supply is heading into the markets this week. The job market is still showing weakness, but the economy appears to be flattening out, even hinting that growth may be on the horizon. All-in-all, mortgage backed securities rose to test the 100-day moving average, then failed to break through, keeping the long term downtrend in place, meaning mortgage rates appear to remain on the rise. As for today, with no data being released, technical factors took over, which means it was time for at least a small correction after the big drop Friday.
This week started off light, but it promises to be an interesting week ahead as some key data plays will be released, including the Personal Consumption Expenditures (PCE) on Friday. Here is what lies on the schedule…
- Monday: 3-month T-Bill Auction (1:00), 6-month T-Bill Auction (1:00)
- Tuesday: S&P Case-Shiller HPI (9:00), Consumer Confidence (10:00), 4-week T-Bill Auction (11:30), 52-week T-Bill Auction (1:00), 2-year T-Note Auction (1:00)
- Wednesday: MBA Purchase Applications (7:00), Durable Goods Orders (8:30), New Home Sales (10:00), Crude Inventories (10:30), Dennis Lockhart Speech (11:30), 5-year T-Note Auction (1:00)
- Thursday: Jobless Claims (8:30), GDP (8:30), 7-year T-Note Auction (1:00), James Bullard Speech (5:00)
- Friday: PCE (8:30), Personal Spending (8:30), Personal Income (8:30), Consumer Sentiment (9:55)
This week will definitely be a week to remember and will help shape the future for mortgage rates. If there was ever a chance to have MBS pricing break its trend, this week could be it, but don’t count on it.
On the technical side of things, there are several “negatives” that can be seen. We still have that “squeeze play” going on, but we have the 100-day moving average about to crossover below the 200-day MA, a very bad sign if it happens. We did get a negative crossover on the stochastic indications as well, but the 50-day moving average did hold steady today. As the week progresses, I would bet that mortgage bond pricing will break out of this squeeze and show us where mortgage rates will be going for quite some time.
This week will be yet another day-by-day play, but the trend remains towards higher mortgage rates over the long term. If data comes in very favorable for mortgage bond pricing, we may see another attempt to break through the 100-day moving average and destroy the downtrend. However, if any attempts do fail, mortgage rates will continue to climb.
Keeping up to date and ensuring we don't lose hope is a good way to fight back. I know the market is tough but we need to keep trying. Attending seminars, training, sharing thoughts and identifying where some alternatives are could work to survive this difficult economy. Thanks for sharing this information.