Tuesday, April 7, 2009

There is nothing on this holiday-shortened week's economic calendar that will likely drive mortgage interest rates in one direction or the other -- leaving the trend trajectory of rates to be largely determined by trading action in the equity markets.

There are a number of technical reasons to believe the rally in the stock markets that began in mid-March is running out of upward momentum. If the assessment proves accurate, falling stock prices will almost certainly support steady to fractionally lower mortgage interest rates.

The Treasury Department will sell $6 billion of 10-year inflation-indexed notes today, $35 billion of 3-year notes tomorrow and $18 billion of 10-year notes on Thursday. The 10-year inflation-indexed securities and the 3-year notes will likely sell well -- but the Fed will probably have to whip out their checkbook and buy a significant portion of Thursday's 10-year note offering to keep yields - and by extension mortgage interest rates - from moving noticeably higher.

Look for investors to attempt to nudge the yield of the 10-year note higher over the course of the next two days -- but when the final gavel falls to conclude bidding at 11:30 a.m. ET on Thursday chances are the Fed, the weak economy and a sell-off in the stock markets will have combined to sharply limit or outright defuse any influence this 10-year note auction might otherwise have on the current level of mortgage interest rates.