The National Association of Realtors reported this morning that September Existing Home Sales posted a stronger than expected month-over-month increase of 10.0% -- a value well above most economists' projections calling for a 4.0% improvement. That is the good news. The bad news is that even with the September improvement, we're still at remarkably depressed levels. Existing home sales are almost 20% below year-ago-levels. This data series will probably continue to be supportive of steady to fractionally lower mortgage interest rates until the fundamental driver of housing demand -- job growth - can generate sustained upward momentum - something most analysts do not expect to occur until mid-2011 at the earliest.
Credit market participants are bracing for a big four-part Treasury auction that kicks off this week. On the auction block today will be a $10 billion stack of 5-year inflation-indexed securities that will be followed by $35 billion of 2-year notes tomorrow, $35 billion of 5-year notes on Wednesday and will wrap-up with the sale of $29 billion of 7-year notes on Thursday. A consensus is building around the idea that the Fed will focus a large part of their "QE2" buying appetite on Treasury obligations with 5-year to 10-year maturities - an outlook that will likely prove very supportive for the majority of the offerings on the blocks for sale this week. If so, Uncle Sam's borrowing spree this week will not likely take much, if any toll on the current level of mortgage interest rates.
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