Mar 10
15
What’s Ahead for Mortgage Rates March 15th, 2010
Last Week; after all the chopping around the longer end of the yield curve ended generally unchanged, mortgage rates and prices were unchanged. At the middle and short end of the yield curve rates increased, the 5 yr treasury increased to 2.41% up 7 basis points, the 2 yr note jumped 6 basis points to 0.96%. The short end saw position covering from the relaxing of the Greek deficit problems as European countries vowed to keep Greece from defaulting on its sovereign debt.
Not a lot of economic measurements to work on, but what there was added to the conviction that the economy is continuing to improve. Feb retail sales increased 0.3%, slightly more than expectations; when we strip away auto and gasoline retail sales were up 0.8%. Weekly unemployment claims continued to decline, down 6K for the previous week. Treasury once again found strong demand for its debt, selling $74B in 3 yr, 10 yr and 30 yr instruments. Equity markets moved up a little, but volume through the week was thin.
This Week; no Treasury borrowing, it is an every other week event. The key this week is the FOMC meeting on Tuesday with the Fed’s policy statement at its conclusion. Look for the statement to be re-worded on the issue as to when the Fed will begin to increase short term interest rates. For the last three meetings the phrase “for an extended period of time” was how the Fed answered how long it would leave interest rates low. An increasing number of FOMC members and Fed Presidents are pushing for a statement that has has less certainty, and want the extended period changed to allow more wiggle room for the Fed. This week the economic calendar has housing starts and permits for Feb, both expected to have declined from Jan; two measurements on inflation with Feb PPI and CPI, and the Philadelphia Fed business index.
Interest rate markets continue to have a slight bearish technical pattern but are completely fixated on how stock investors act; any decline in rates will be keyed on stock market declines as the ebb and flow on the future of the economy continue to dominate all thinking. Also on tap this week; it looks like Congress is going to ram through the health care reform. A plan that few understand, and a plan that in six years will blow another hole in the federal budget deficit. Look for the interest rate markets to be choppy again with not much change this week.
In Summary:
- Monday : Industrial Production and Home Builder Index
- Tuesday : Housing Starts and Building Permits
- Wednesday: Consumer Confidence
- Thursday : Producer Price Index and Initial Jobless Claims
- Friday : Consumer Price Index and Continuing Jobless Claims
If all that weren’t enough to digest, the Federal Open Market Committee meets for a scheduled, 1-day event Tuesday. They are expected to vote and hold the Federal Funds Rate a it’s Target of 0%. However, that doesn’t mean mortgage rates won’t change. Remember, it’s not so much what the do, it ‘what’ and ‘how’ they say it. I’ll and the markets will be paying close attention to their language.
If you are floating a mortgage rate right now… strap in! It’s gonna be a bumpy ride!
