SUNDAY, August 22, 2010

To Preview the upcoming economic week and how it may affect mortgage rates:


Mortgage investors will likely move into a defensive position this week opting to take a "wait-and-see" approach before giving consideration to pushing rates noticeably lower from current levels. There is a huge amount of "bad" economic news already priced into the market. If the home sales data and/or the revised GDP figure prove stronger-than-expected – look for investors to respond by pushing rates higher.


REPORTS DUE OUT:


Mon. Aug. 23, 1:00 p.m. ET Treasury sells $7 billion of 30-year inflation indexed securities The "adjustable" feature of these securities will likely make them very attractive to the global investment community. If so, this auction will likely be a "non-event" in terms of the mortgage market.
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Tues. Aug. 24, 10:00 a.m. ET July Existing Home Sales -10.0% Mortgage investors are expecting a dismal number here and they are not likely going to be disappointed. If so, this data will likely favor steady mortgage interest rates.

Tues. Aug. 24, 1:00 p.m. ET Treasury sells $37 billion of 2-year notes The relative short maturity of this security should be attractive to a large number of investors. If so, this event will likely have little, if any meaningful impact on the direction of mortgage rates.
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Wed. Aug. 25, 8:30 a.m. ET July Durable Goods Orders Ex. Transportation +3.0% vs. last -1.2% +0.5% vs. last -0.9% Only in the off-chance the actual numbers exceed the consensus estimate will this report exert any notable upward influence on the direction of mortgage interest rates.

Wed. Aug. 25, 10:00 a.m. ET July New Home Sales +3.0% Sharp declines in the weekly mortgage purchase application index strongly suggest demand for new homes remains sluggish -- a condition that will surprise no one. This data will likely exert little, if any influence on the direction of mortgage interest rates today.

Wed. Aug. 25, 1:00 p.m. ET Treasury sells $36 billion of 5-year notes This auction will likely be a non-event as far as mortgage interest rates are concerned. But pay attention here. A poorly bid 5-year note auction will probably create a "snowball-effect" that pushes both government debt yields and mortgage interest rates higher as the week progresses. The chances of a mortgage unfriendly outcome today are small – but not so small this event can be completely ignored;
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Thurs. Aug. 26, 8:30 a.m. ET Initial jobless claims for the week ended 8/21 Down 10,000 to 490,000 Until the total number of initial jobless claims falls below 400,000 on a week-over-week basis -- this data will tend to support steady mortgage interest rates.

Thurs. Aug. 26, 1:00 p.m. ET Treasury sells $27 billion of 7-year notes Only in the unlikely event the investment community-atlarge believes the worst of the recession is behind us will the yield of this security climb at today’s auction. If the yield on this offering rises -- it is highly likely mortgage interest rates will begin to climb higher as well. I don’t think there is much to worry about here – but give the auction results at least a passing glance.
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Fri. Aug. 27, 8:30 a.m. ET Revised Q2 Gross Domestic Product +1.4% vs. last 2.4% Recent data points to a smaller contribution to the nation’s economic growth from inventory rebuilding and foreign trade is creating a larger drag than previously expected. The economy’s second-quarter growth rate is almost certain to be revised lower – a condition that is already well priced into the mortgage market.

Fri. Aug. 27, 11:00 a.m. ET Fed Chairman speaks at economic symposium in Jackson Hole Wyoming This is event is the "wildcard" of the week. There is a chance Fed Chairman Bernanke may use this opportunity to put market participants on notice that the Fed will soon begin to take more aggressive action in terms of its stimulus programs. If so, look for this event to be supportive of steady to perhaps fractionally lower rates.