Friday, March 12, 2010

As you probably know by now - retail sales came in surprisingly strong in February, raising 0.3% in total and 0.8% excluding autos despite the inclement weather that battered much of the country last month.


As usual the devil is in the detail, especially when cooler, calmer heads saw the major downward revisions that were made to the January figures - which originally indicated sales were up a robust 0.5% -- but audits of the data revealed overall sales were actually up a very modest 0.1%. Taken in a broader context these more experienced traders were quick to note that sales in February were below their February '08 and '07 levels. It remains abundantly apparent that as loan as high unemployment continues to squeezed household incomes, spending will remain constrained - and that is a condition that tends to be supportive of steady mortgage interest rates.


Looking ahead to next week mortgage investors will nervously await Tuesday's Federal Open Market Committee meeting. In the run-up to this event traders' traditional handwringing and floor pacing will likely once again prove to be much ado about nothing. With a national jobless rate of 9.7% and inflation pressures not even a "blip" on policymakers' radars it is almost a certainty that the Fed will leave their benchmark short-term interest rates unchanged. If this assessment proves accurate, the Fed's monetary policy position will continue to be supportive of steady to perhaps fractionally lower mortgage interest rates.