If you are as tired as I am these days, then this coming week will offer some rest as economic data is on the low side. That being said, you can’t let your guard down just because mortgage backed securities did what was expected and seem to be in rally mode.
Last week was mostly about the Jobs Jamboree and how it did not paint anything near a rosy picture on the jobs front. With payrolls worse than expected (even after the ADP Employment Report prediction), Hourly Earnings dropped and the Average Work Week fell as well. Of course, you forget that the Unemployment Rate ticked higher. Overall, the numbers mean one thing, continued struggles for those seeking jobs and the subsequent drain on the economy, which is good news for mortgage bonds. With inflationary concerns being held back, there was little MBS pricing could do but move higher as the data poured in. But things do change, especially after a long run-up in MBS prices, so watch for that retracement.
Looking ahead to this week, the technical indications will be the main driving force, that is unless something major hits the airwaves. With only a trickle of data this week, look to the charts for answers as to where mortgage rates are heading. As for the events for this week, here is the current rundown…
- Monday: ISM Services Index (10:00), 3-month T-Bill Auction (11:30), 6-month T-Bill Auction (11:30), 10-year TIPS Auction (1:00)
- Tuesday: 4-week T-Bill Auction (11:30), 3-year T-Note Auction (1:00), Treasury STRIPS (3:00), Thomas Hoeniq Speaks (9:45)
- Wednesday: MBA Purchase Applications (7:00), Crude Inventories (10:30), 10-year T-Note Auction (1:00), Consumer Credit (3:00)
- Thursday: Jobless Claims (8:30), Donald Kohn Speaks (12:15), 30-year T-Bond Auction (1:00), Jeffrey Lacker Speaks (1:15), Daniel Tarullo Speaks (3:35), Money Supply (4:30), Ben Bernanke Speaks (7:00), Thomas Hoenig Speaks (8:45)
- Friday: Balance of Trade (8:30)
As you can see, there is a very limited supply of economic data this week, and none of the reports are typically market moving. The main events to watch for this week are the Treasury Auctions, especially the longer-term ones, as any lack of demand could spread through the markets to affect mortgage backed securities as well.
Looking at the charts, we are at overhead resistance, and stochastic indications are turning negative as well as being in the overbought spectrum. With the latest move higher, a pullback is virtually guaranteed and due, so in the short-term, locking your clients is a good deal. The longer term outlook shows somewhat of a different picture. With the breaking of the past ceiling, we have yet to fully establish a trend, though an uptrend, or a new sideways patter, may be in the works.
The bottom line for this week, mortgage rates will likely see at least a short-term uptick as they seek a balance from the latest rally, after that, lower mortgage rates may be back in the works. Keep an eye on the Treasury Auctions as they may very well be the “guiding light” for the week.
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{ 2 comments… read them below or add one }
Rates have been fantastic recently! I hope the lack of data coming out in the near future means we keep this pricing…
-Matt Cady Orange County Mortgage
The mortgage market here in Spain is absolutely awful currently, LTV is a thing of the past, as is a decent rate of approvals. Banks were so quick to throw money at ex-pats here in the Costa Del Sol and are now seeing so many delinquencies it is untrue.
Many people are simply walking away from their overseas investments in the home that the banks won´t chase them back inn their home countries. A littlñe naive I think.
La Zagaleta