Mortgage Market Update – July 12, 2010
Happy Monday morning to all and it is another bright, sunny day here in South Florida. Unfortunately, things are not so bright in the mortgage backed securities market and exactly where MBS prices, and thus mortgage rates, are going to go could get very interesting this week. Remember that last week I ended saying that the charts favored mortgage rates holding steady but things were changing, so we will get into exactly what has changed, if anything, in this week’s report.
Last week saw very little in the way of data, especially market moving data. In fact, data and events were so scarce that technical factors and news played the role most of the week and that helped MBS prices keep from going anywhere. We continued to see that the economic recovery is weakening and that is keeping strength in the “safety” investments, evidenced by strong short-term Treasury Auctions. We continue to see a lack of demand for home purchases which points to a very weak housing market, which I have stated numerous times in the past. And, of course, Jobless Claims continue to be high and do not look to be coming down significantly anytime in the near future. Again, the Labor Department is not citing any issues that may be skewing this report, signaling that the numbers may be solid. All-in-all, data continues to point in favor of MBS prices and low mortgage rates, but the charts are picturing something different.
As we get this week started, we kick it off with Big Ben (Ben Bernanke) speaking about how credit is needed to get the economy going, particularly small business credit. Makes sense right, in an economy that thrives on people overextending themselves, they need to be able to do it again or the economic recovery is questionable. As the week gets wound up, data will be rolling in and that, along with the Treasury Auctions announced last week, will likely shake the markets up this week, for better or worse. Here is what we have already scheduled this week…
- Monday: Ben Bernanke Speaks (10:00), 3-month T-Bill Auction (11:30), 6-month T-Bill Auction (11:30), 3-year T-Note Auction (1:00), Elizabeth A. Duke Speaks (5:15)
- Tuesday: International Trade (8:30), 4-week T-Bill Auction (11:30), 10-year T-Note Auction (1:00)
- Wednesday: MBA Purchase Applications (7:00), Retail Sales (8:30), Import and Export Prices (8:30), Crude Inventories (10:30), 30-year T-Bond Auction (1:00), FOMC Minutes (2:00)
- Thursday: Producer Price Index (PPI – 8:30), Empire State Manufacturing Survey (8:30), Jobless Claims (8:30), Industrial Production (9:15), Philadelphia Fed Survey (10:00), Money Supply (4:30), Jeffrey Lacker Speaks (7:15)
- Friday: Consumer Price Index (CPI – 8:30), Consumer Sentiment (9:55)
As you can see, there are some heavy-hitters coming up and plenty of other data to make waves in the markets once we get going. We will not only be getting a look at how the economic recovery is going but also a look at the inflation side. I still think inflation will be on the tame side, but any hint inflation may be coming back could rock the markets. Hold on tight becuase it may be a bumpy ride ahead.
Looking at the charts, we see a sideways pattern has essentially developed over the last couple of weeks. MBS prices cannot seem to make any additional moves higher, but they do not appear ready to turn around yet either. Unfortunately, however, things have become a little more negative than last week and that brings to question what lies ahead. Stochastic indications are still in the overbought spectrum, though have room to move higher. MBS prices are still holding above their rising 10-day moving average and every moving average is still rising as well. The negative comes in the fact we had a new high on Wednesday, which did not hold, and have failed to get back to that level as of yet. If we fail to get back to that level, the charts will become somewhat bearish, meaning things may be about to turn around.
The bottom line this week is it is another day-by-day play sheet. Mortgage rates are holding steady, but may not be able to hold these low rates much longer, maybe not even through this week. Once again, I emphasize the need to follow my daily market commentary at Florida Mortgage Daily. Also, be sure you are working with reputable mortgage professionals and not just a team of “marketers”. Additionally, don’t get duped by mortgage myths. To this extent, a group of mortgage professionals including myself have finally launched Mortgage Myth Busters today, which you can read a little more about on ActiveRain or by visiting the website. Oh, and don’t forget to check out today’s radio show.