The economic calendar is vacant today - leaving mortgage investors with little more than trading activity in the stock markets from which to take their directional cues for mortgage interest rates. Higher stock prices tend to push mortgage interest rates higher while lower stock prices are usually supportive of steady to perhaps fractionally lower mortgage interest rates.
Uncle Sam will be in the credit markets for three successive days beginning tomorrow -- looking to borrow a total of $81 billion in the form of 3- and 10-year notes together with a package of 30-year bonds. Persistent concerns over potential sovereign debt defaults by Greece and other debt-laden European nations - together with worries about the "contagion effect" such an event might create for the global economy as a whole -- is almost certain to create solid "flight-to-quality" demand at this week's three-part Treasury auction. If so, the deluge of incoming debt supply from Uncle Sam will not likely move mortgage interest rates much one way or the other.
Fed Chairman Bernanke is scheduled to testify before the House Financial Services Committee on Wednesday at 10:00 a.m. ET. The broad topic has to do with publicly exploring the Fed's wind-down plans for a number of existing stimulus programs - not the least of which is the Fed's direct mortgage-backed security purchase initiative set to expire at the end of March. Mortgage market participants will be listening intently for anything market moving - but they will likely hear little more than political posturing from committee members.
For his part, Chairman Bernanke can be expected to do his level best to prevent monetary policy and the related strategies from becoming politicized. He is keenly aware history is strewn with lessons about the financial catastrophes that have befallen nations that travelled down the slippery slope of allowing politically motivated parties to set monetary policy. If the Fed appears in any way appears to be losing its independence -- expect mortgage investors to register their concern by pushing mortgage interest rates higher.
The only major economic report on tap this week is Thursday's 8:30 a.m. ET release of the January Retail Sales figures. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
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