Mortgage investors have put the finishing touches on risk management positions and have moved to the sidelines in front of Uncle Sam's three-part borrowing spree that begins tomorrow with the sale of a $40 billion stack of 3-year notes, $21 billion of 10-year notes on Wednesday and concluding with a $13 billion batch of 30-year notes on Thursday.
The 10-year note and 30-year bond sales will exert the most influence on the trend trajectory of mortgage interest rates. If these two auctions are aggressively bid by the global investment community -- look for mortgage interest rates to remain very near current levels. If the government is forced to drop the price on one or both of these securities in order to attract the necessary capital -- mortgage interest rates will almost certainly edge higher.
The economic calendar won't offer anything substantial for mortgage investors to chew-on until Friday's 8:30 a.m. release of the February Retail Sales figures. The consensus estimate is currently forecasting the pace of retail sales was 0.2% lower last month while sales excluding autos are expected to post a very modest gain of 0.1%. If the consensus estimate is accurate, the February retail sales data will likely prove to be supportive of steady mortgage interest rates. Should the actual February retail sales headline figure post a gain of 0.1% or more and the ex. auto component shows a gain 0.3% or more -- look for mortgage investors to push interest rates fractionally higher.
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