Mortgage Market Update

Greetings to all.  This week’s update is coming live from the RE BarCamp in Miami.  Being that you are likely in the real estate industry in some fashion, I highly recommend getting to a few of the events such as these so you can learn more and more about social media and how it can help your business.

Enough of the marketing junk, let’s get down to what to expect this week by first looking at last week.  There wasn’t much data and we never really got a genuine correction to take place, so expect a correction of at least a little this week, but expect also a rebound and maybe even a push to the highest mortgage bond pricing in quite some time.  One of the subtle reports from last week which may help shape this week was the Consumer Credit report which showed a huge drop, signaling the potential of a large miss in this week’s Retail Sales report.  That could be the point of the next leg higher.  Treasury Auctions all went well, keeping MBS prices from doing their corrective move last week.  So let’s get into this week, shall we?

This week will definitely see things heating up with more insight into inflation, or lack thereof, and the economic recovery, or stagnation therein.  As mentioned already, we may see some surprises this week, and maybe for the better tin terms of mortgage rates.  here is this week’s breakdown…

• Monday:  Elizabeth Duke speech (8:35), Jeffrey Lacker Speech (12:30), 3-month T-Bill Auction (1:00), 6-month T-Bill Auction (1:00), Janet Yellen Speech (3:50)
• Tuesday:  Producer Price Index (PPI – 8:30), Retail Sales (8:30), Empire State Manufacturing Index (8:30), 4-week T-Bill Auction (1:00)
• Wednesday:  MBA Purchase Applications (7:00), Consumer Price Index (8:30), Industrial Production (9:15), Crude Inventories (10:30), Housing Market Index (1:00)
• Thursday:  Housing Starts (8:30), Jobless Claims (8:30), Philadelphia Fed Survey (10:00), Treasury Announcements (11:00)
• Friday:  No data, have a great weekend.

As you can clearly see, there is a big step up in data this week with a full scale battle taking place as we have several heavy-hitting reports coming out.  What direction will mortgage rates go?  For that, let’s get into the technical side of things.

Looking at the charts, we still see stochastic indications on the higher end, almost into the overbought spectrum, but they have been sliding lower.  Today saw mortgage backed securities pricing dip below their 200-day moving average, but this level has not been acting like the stronghold of the past, so even a dip below does not signal the end of low mortgage rates.  Rather, the dip below will likely just mark a leg of correction that needs to take place before the next leg higher begins.  On the positive side of things, the 25-day moving average did crossover the 100-day moving average as expected, certainly signaling the potential of better times still ahead.  Even the 10-day moving average is trying to breakout above the 200-day MA, which would be yet another positive sign for the future of mortgage rates.

The bottom line is that this week will be another to take day-by-day, but with a potentially big miss on Retail Sales and the likelihood of low inflation reports, we may see MBS pricing push to new highs for the recent trading time frame and signal lower mortgage rates ahead.