Monday, March 9, 2009

The economic calendar offers nothing of particular substance. The highlight of the week, from a macro-economic perspective, will be the Commerce Department's release of the February Retail Sales report at 8:30 a.m. ET on Thursday, March 12th. If the Retail Sales figures remain near unchanged from January levels - look for mortgage investors to interpret the data as a slight negative for the prospects of lower mortgage interest rates.

The opinion of most is the February Retail Sales headline figure will have to fall by 1.0% or more while the component of the report that excludes auto sales simultaneously posts a decline of at least 0.4% to induce mortgage investors to nudge mortgage interest rates lower from current levels. While such an outcome is possible - it is not very probable.

As it has been since the first of the year -- the trend trajectory of mortgage interest rates will likely be driven by two counter-weighted forces. On the one hand Uncle Sam's massive appetite for debt will tend to push prices on Treasury obligations lower - creating some upward pressure on mortgage interest rates.
This supply pressure can/will be offset in part or in total by further weakness in the stock markets. Should stocks continue to sell-off -- the bid for Treasury obligations and mortgage-backed securities will improve as surviving capital from the stock market swoon is shepherded into the safest investments available.

From a technical perspective there are an increasing number of indications suggesting the capitulation phase in the current sell-off in the stock markets will possibly be completed before the month is out. If that assessment proves accurate, the prospects for notably lower mortgage rates are growing increasingly dim.