Different day - same story.
Mortgage investors are once again taking a cautious "wait-and-see" attitude in front of the Treasury Department's $16 billion 30-year bond sale this afternoon. Tuesday's 3-year note offering and yesterday's 10-year note sale were ugly - which does not bode well for the prospects of robust bidding at today's 30-year bond offering. If this assessment proves accurate, look for upward pressure on mortgage interest rates to prevail for most of the day.
The Labor Department announced this morning that initial weekly jobless benefit claims for the week ended February 6th dropped 43,000 to a seasonally adjusted 440,000. For the week ended January 23rd , enrollment in extended benefits programs increased by 13,208 to 236,041 while enrollment in the government's Emergency Unemployment Compensation program fell by 184,627 to 5.448 million.
Boiling all this statistical mumbo-jumbo down the indications are growing that the labor market is improving - at a just barely perceptible pace. First-time filings for unemployment benefits were kept artificially low in late December and early January because of the holidays and then were biased to the high side in late January as the Labor Department caught up on their claims processing. Mortgage investors essentially shrugged the whole thing off - reasoning that until initial weekly jobs claims stabilize around the 400,000 per week level - net month-over-month job creation will not be strong enough to exert significant upward pressure on mortgage interest rates.
The Commerce Department has postponed the release of the much anticipated January Retail Sales report until 8:30 a.m. ET tomorrow. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Thursday, February 11, 2010
Wednesday, February 10, 2010
Mortgage investors are taking a cautious "wait-and-see" attitude in front of the Treasury Department's $25 billion 10-year note auction this afternoon. The ongoing saga surrounding the fiscal crisis in Greece initially sparked demand for dollar-denominated Treasury debt obligations as European investors looked for a safe-placed to park their capital to avoid getting caught in a potential meltdown of the European economy. The massive inflow of capital helped hold not only the yields on Treasury debt obligations down - but mortgage interest rates as well.
There is growing speculation that euro zone countries are on the verge of cobbling together a rescue package that will, at least temporarily, ensure that Greece averts financial disaster. The uncertainty swirling around this event will make it difficult for investors to know exactly how to bid at today's 10-year note auction. If a viable rescue plan is announced the international capital markets will breathe a sigh of relief and the safe haven appeal of dollar-denominated assets will fade - resulting in slumping prices. That's a condition that suggests investors should avoid bidding aggressively for today's offering from Uncle Sam. If that scenario plays out look for additional upward pressure on mortgage interest rates to develop this afternoon.
On the other hand - if it becomes apparent conditions within the structure of the European Union are going to prove to be an impediment to any bailout attempt (as some analysis are currently suggesting) - the prospects are high than massive amounts of additional capital will flow out of Europe into the relatively safe haven of dollar-denominated assets like Treasury obligations - a very strong argument for aggressively bidding at today's auction. If this scenario plays out look for mortgage interest rates to move sideways to perhaps fractionally lower by the end of the day.
In any case, I think you can bet your bottom-dollar that the majority of mortgage investors will choose to remain safely on the sidelines awaiting further developments regarding the attempts to rescue the sovereign debt of Greece from the clutches of default.
Fed Chairman Ben Bernanke and members of the House Financial Services Committee slogged through a blizzard to meet to discuss the Fed's strategies for winding down the multitude of fiscal stimulus programs currently under its control. Bernanke make it clear from the outset that the time for tightening monetary policy is still months away. Chairman Bernanke indicated when the time comes to beginning reducing the massive amount of stimulus that was injected into the financial system the Fed will likely move to increase the interest rate it pays on reserves member banks hold at the Federal Reserve.
Raising the interest rates on these deposits would encourage banks to park funds with the Fed, effectively taking the money out of circulation. Capital market participants appear to believe this first-move to be reasonable and functional judging by the relatively calm pace of trading during and following Mr. Bernanke's testimony. As this juncture I think it is safe to consider this event to be mortgage market neutral.
The only major economic report on tap this week will arrive tomorrow morning at 8:30 a.m. ET with the release of the January Retail Sales figures. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
There is growing speculation that euro zone countries are on the verge of cobbling together a rescue package that will, at least temporarily, ensure that Greece averts financial disaster. The uncertainty swirling around this event will make it difficult for investors to know exactly how to bid at today's 10-year note auction. If a viable rescue plan is announced the international capital markets will breathe a sigh of relief and the safe haven appeal of dollar-denominated assets will fade - resulting in slumping prices. That's a condition that suggests investors should avoid bidding aggressively for today's offering from Uncle Sam. If that scenario plays out look for additional upward pressure on mortgage interest rates to develop this afternoon.
On the other hand - if it becomes apparent conditions within the structure of the European Union are going to prove to be an impediment to any bailout attempt (as some analysis are currently suggesting) - the prospects are high than massive amounts of additional capital will flow out of Europe into the relatively safe haven of dollar-denominated assets like Treasury obligations - a very strong argument for aggressively bidding at today's auction. If this scenario plays out look for mortgage interest rates to move sideways to perhaps fractionally lower by the end of the day.
In any case, I think you can bet your bottom-dollar that the majority of mortgage investors will choose to remain safely on the sidelines awaiting further developments regarding the attempts to rescue the sovereign debt of Greece from the clutches of default.
Fed Chairman Ben Bernanke and members of the House Financial Services Committee slogged through a blizzard to meet to discuss the Fed's strategies for winding down the multitude of fiscal stimulus programs currently under its control. Bernanke make it clear from the outset that the time for tightening monetary policy is still months away. Chairman Bernanke indicated when the time comes to beginning reducing the massive amount of stimulus that was injected into the financial system the Fed will likely move to increase the interest rate it pays on reserves member banks hold at the Federal Reserve.
Raising the interest rates on these deposits would encourage banks to park funds with the Fed, effectively taking the money out of circulation. Capital market participants appear to believe this first-move to be reasonable and functional judging by the relatively calm pace of trading during and following Mr. Bernanke's testimony. As this juncture I think it is safe to consider this event to be mortgage market neutral.
The only major economic report on tap this week will arrive tomorrow morning at 8:30 a.m. ET with the release of the January Retail Sales figures. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Tuesday, February 9, 2010
Tuesday, February 9, 2010
Different day - essentially the same story. The economic calendar is vacant once again today - leaving mortgage investors with little more than trading activity in the stock markets from which to take their directional cues for mortgage interest rates - at least through the conclusion of Uncle Sam's $40 billion 3-year note auction this afternoon at 1:00 p.m. ET. Look for higher stock prices to drag mortgage interest rates higher while lower stock prices will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates.
Uncle Sam will kick-off a three-day borrowing spree today with the sale of $40 billion worth of 3-year notes. The relatively short duration of these notes should draw strong participation levels from domestic as well as foreign investors. If so, this event will likely prove supportive of steady mortgage interest rates. Casting a shadow over the prospects for notably lower mortgage interest rates this week is tomorrow's $25 billion 10-year note auction followed by Thursday's $13 billion 30-year bond sale.
Persistent concerns over potential sovereign debt defaults by Greece and other debt-laden European nations - together with worries about the "contagion effect" such an event might create for the global economy as a whole - has the potential to create solid "flight-to-quality" demand for these two offerings. If so, this deluge of incoming longer-term debt supply from Uncle Sam will not likely move mortgage interest rates much one way or the other. There is a chance that prior to one or both of these sales the European Central Bank may announce a viable financial rescue plan has been developed for Greece and Portugal. If so, the immediate threat of a major upheaval in the collective European economy will fade - reducing the massive "flight-to-quality" buying spree currently supporting the Treasury market. If such a scenario develops - expect upward pressure on mortgage interest rates to increase.
Fed Chairman Bernanke is scheduled to testify before the House Financial Services Committee on Wednesday at 10:00 a.m. ET. The broad topic has to do with publicly exploring the Fed's wind-down plans for a number of existing stimulus programs - not the least of which is the Fed's direct mortgage-backed security purchase initiative set to expire at the end of March. Mortgage market participants will be listening intently for anything market moving - but they will likely hear little more than political posturing from committee members. For his part, Chairman Bernanke can be expected to do his level best to prevent monetary policy and the related strategies from becoming politicized. He is keenly aware history is strewn with lessons about the financial catastrophes that have befallen nations that travelled down the slippery slope of allowing politically motivated parties to set monetary policy. If the Fed appears in any way to be losing its independence -- expect mortgage investors to register their concern by pushing mortgage interest rates higher.
Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Uncle Sam will kick-off a three-day borrowing spree today with the sale of $40 billion worth of 3-year notes. The relatively short duration of these notes should draw strong participation levels from domestic as well as foreign investors. If so, this event will likely prove supportive of steady mortgage interest rates. Casting a shadow over the prospects for notably lower mortgage interest rates this week is tomorrow's $25 billion 10-year note auction followed by Thursday's $13 billion 30-year bond sale.
Persistent concerns over potential sovereign debt defaults by Greece and other debt-laden European nations - together with worries about the "contagion effect" such an event might create for the global economy as a whole - has the potential to create solid "flight-to-quality" demand for these two offerings. If so, this deluge of incoming longer-term debt supply from Uncle Sam will not likely move mortgage interest rates much one way or the other. There is a chance that prior to one or both of these sales the European Central Bank may announce a viable financial rescue plan has been developed for Greece and Portugal. If so, the immediate threat of a major upheaval in the collective European economy will fade - reducing the massive "flight-to-quality" buying spree currently supporting the Treasury market. If such a scenario develops - expect upward pressure on mortgage interest rates to increase.
Fed Chairman Bernanke is scheduled to testify before the House Financial Services Committee on Wednesday at 10:00 a.m. ET. The broad topic has to do with publicly exploring the Fed's wind-down plans for a number of existing stimulus programs - not the least of which is the Fed's direct mortgage-backed security purchase initiative set to expire at the end of March. Mortgage market participants will be listening intently for anything market moving - but they will likely hear little more than political posturing from committee members. For his part, Chairman Bernanke can be expected to do his level best to prevent monetary policy and the related strategies from becoming politicized. He is keenly aware history is strewn with lessons about the financial catastrophes that have befallen nations that travelled down the slippery slope of allowing politically motivated parties to set monetary policy. If the Fed appears in any way to be losing its independence -- expect mortgage investors to register their concern by pushing mortgage interest rates higher.
Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Monday, February 8, 2010
Monday, February 8, 2010
The economic calendar is vacant today - leaving mortgage investors with little more than trading activity in the stock markets from which to take their directional cues for mortgage interest rates. Higher stock prices tend to push mortgage interest rates higher while lower stock prices are usually supportive of steady to perhaps fractionally lower mortgage interest rates.
Uncle Sam will be in the credit markets for three successive days beginning tomorrow -- looking to borrow a total of $81 billion in the form of 3- and 10-year notes together with a package of 30-year bonds. Persistent concerns over potential sovereign debt defaults by Greece and other debt-laden European nations - together with worries about the "contagion effect" such an event might create for the global economy as a whole -- is almost certain to create solid "flight-to-quality" demand at this week's three-part Treasury auction. If so, the deluge of incoming debt supply from Uncle Sam will not likely move mortgage interest rates much one way or the other.
Fed Chairman Bernanke is scheduled to testify before the House Financial Services Committee on Wednesday at 10:00 a.m. ET. The broad topic has to do with publicly exploring the Fed's wind-down plans for a number of existing stimulus programs - not the least of which is the Fed's direct mortgage-backed security purchase initiative set to expire at the end of March. Mortgage market participants will be listening intently for anything market moving - but they will likely hear little more than political posturing from committee members.
For his part, Chairman Bernanke can be expected to do his level best to prevent monetary policy and the related strategies from becoming politicized. He is keenly aware history is strewn with lessons about the financial catastrophes that have befallen nations that travelled down the slippery slope of allowing politically motivated parties to set monetary policy. If the Fed appears in any way appears to be losing its independence -- expect mortgage investors to register their concern by pushing mortgage interest rates higher.
The only major economic report on tap this week is Thursday's 8:30 a.m. ET release of the January Retail Sales figures. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Uncle Sam will be in the credit markets for three successive days beginning tomorrow -- looking to borrow a total of $81 billion in the form of 3- and 10-year notes together with a package of 30-year bonds. Persistent concerns over potential sovereign debt defaults by Greece and other debt-laden European nations - together with worries about the "contagion effect" such an event might create for the global economy as a whole -- is almost certain to create solid "flight-to-quality" demand at this week's three-part Treasury auction. If so, the deluge of incoming debt supply from Uncle Sam will not likely move mortgage interest rates much one way or the other.
Fed Chairman Bernanke is scheduled to testify before the House Financial Services Committee on Wednesday at 10:00 a.m. ET. The broad topic has to do with publicly exploring the Fed's wind-down plans for a number of existing stimulus programs - not the least of which is the Fed's direct mortgage-backed security purchase initiative set to expire at the end of March. Mortgage market participants will be listening intently for anything market moving - but they will likely hear little more than political posturing from committee members.
For his part, Chairman Bernanke can be expected to do his level best to prevent monetary policy and the related strategies from becoming politicized. He is keenly aware history is strewn with lessons about the financial catastrophes that have befallen nations that travelled down the slippery slope of allowing politically motivated parties to set monetary policy. If the Fed appears in any way appears to be losing its independence -- expect mortgage investors to register their concern by pushing mortgage interest rates higher.
The only major economic report on tap this week is Thursday's 8:30 a.m. ET release of the January Retail Sales figures. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Friday, February 5, 2010
Friday, February 5, 2010
Some poems don't rhyme, some stories don't have a clear beginning, middle and end, and some economic reports are completely buggered up. Today's January nonfarm payroll is an excellent example of economic data that leaves everybody scratching their head in confusion.
As you undoubtedly know by now the Labor Department reported the economy shed 20,000 jobs last month after losing a revised 150,000 jobs in December. That's bad. November's headline payroll data was revised to a show a gain of 64,000, up from the originally reported gain of 4,000. That's good. Annual benchmark revisions to the payroll data showed job losses since the recession began were much deeper than originally thought. In all, according to government data wonks the economy has lost 8.4 million jobs since the start of the recession in December 2007. That's bad. But don't despair, the unemployment rate, based on a separate survey of households, fell to 9.7% in January from 10.0% in December - and that's very good.
Confused? Yeah - you're not the only one. It appears the Labor Department is taking a page from history and following former President Harry Truman's advice suggesting, "If you can't convince 'em - confuse em." If so -- kudos to the folks at the Labor Department for a job extremely well done. It appears mortgage investors and other capital market participants have also decided to throw their hands up and completely discount today's employment report -- rather than sort out its many possible nuances.
Looking ahead to next week Uncle Sam will be in the credit markets for three successive days beginning on Tuesday -- looking to borrow a total of $81 billion in the form of 3- and 10-year notes together with a package of 30-year bonds. It will be a relatively light week in terms of economic reports but you can bet traders will pay attention when the January Retail Sales figures are released on Thursday. The consensus estimate is currently projecting a strong 0.5% gain for retail sales last month. If the consensus estimate proves accurate, look for mortgage interest rates to edge fractionally higher.
As you undoubtedly know by now the Labor Department reported the economy shed 20,000 jobs last month after losing a revised 150,000 jobs in December. That's bad. November's headline payroll data was revised to a show a gain of 64,000, up from the originally reported gain of 4,000. That's good. Annual benchmark revisions to the payroll data showed job losses since the recession began were much deeper than originally thought. In all, according to government data wonks the economy has lost 8.4 million jobs since the start of the recession in December 2007. That's bad. But don't despair, the unemployment rate, based on a separate survey of households, fell to 9.7% in January from 10.0% in December - and that's very good.
Confused? Yeah - you're not the only one. It appears the Labor Department is taking a page from history and following former President Harry Truman's advice suggesting, "If you can't convince 'em - confuse em." If so -- kudos to the folks at the Labor Department for a job extremely well done. It appears mortgage investors and other capital market participants have also decided to throw their hands up and completely discount today's employment report -- rather than sort out its many possible nuances.
Looking ahead to next week Uncle Sam will be in the credit markets for three successive days beginning on Tuesday -- looking to borrow a total of $81 billion in the form of 3- and 10-year notes together with a package of 30-year bonds. It will be a relatively light week in terms of economic reports but you can bet traders will pay attention when the January Retail Sales figures are released on Thursday. The consensus estimate is currently projecting a strong 0.5% gain for retail sales last month. If the consensus estimate proves accurate, look for mortgage interest rates to edge fractionally higher.
Thursday, February 4, 2010
Thursday, February 4, 2010
This morning's rally in the mortgage market probably has far more to do with stock market weakness and "flight-to-quality" issues created by growing concerns about national debt defaults by Greece and Portugal -- than it has to do with investors' expectations for a super-weak January nonfarm payroll figure from the Labor Department tomorrow morning.
The European Commission is highly likely to find viable mechanisms to bolster the credit worthiness of these two financial distressed members of the Euro-zone - if for no other reason than the consequences of failure would be extremely onerous for all the members of the confederation.
From a technical perspective I see reason to believe the DOW will likely put in a short-term low between tomorrow, Friday, February 5th and Monday, February 8th in a range between 10064 on the high side and 9994 on the low end. If this assessment proves accurate, the "flight-to-quality" buying spree that has contributed to this morning's nice rally in the mortgage market will fade sharply as money returns to the riskier -- but higher yielding stock markets.
Tomorrow morning's January nonfarm payroll report could miss forecasts currently calling for a headline job gain of 8,000 and a national jobless rate of 10.1% by a wide margin, because of the impact of one-time factors including annual statistical benchmark revision and the direct impact of colder-than-normal winter temperatures on construction and other outdoor employment categories.
Government data wonks are going to make statistical revisions to the number of jobs they guesstimated were lost in 2009 - and the number of jobs the year-end hard figures reflect. Most analysts believe this "adjustment" will result in an increase in the number of job lost for the calendar 2009 of 824,000. This "adjusted" number has been kicked around by market participants for the past couple of weeks -- so as long as the actual value matches up reasonably close -- it probably won't cause much of a reaction among investors.
As the final hours tick down ahead of tomorrow's much anticipated January nonfarm payroll report -- a growing number of analysts are adjusting their forecast to suggest the economy added just 8,000 more jobs than it lost last month - a rather sharp revision from the call for a gain of more than 20,000 jobs that was broadly popular as late as yesterday afternoon. Any positive improvement in the pace of job creation will be a boost for the prospects of further economic recovery - and will tend to put additional upward pressure on mortgage interest rates as capital sources see an opportunity to demand a higher yield for their available investment dollars.
In the convoluted world of the mortgage market lousy jobs reports are almost always supportive of steady to perhaps fractionally lower rates. This time around it will likely take a surprisingly dismal jobs report showing a loss of 15,000 or more jobs together with a national unemployment rate exceeding 10.1% to power a notable move to lower mortgage interest rates.
The European Commission is highly likely to find viable mechanisms to bolster the credit worthiness of these two financial distressed members of the Euro-zone - if for no other reason than the consequences of failure would be extremely onerous for all the members of the confederation.
From a technical perspective I see reason to believe the DOW will likely put in a short-term low between tomorrow, Friday, February 5th and Monday, February 8th in a range between 10064 on the high side and 9994 on the low end. If this assessment proves accurate, the "flight-to-quality" buying spree that has contributed to this morning's nice rally in the mortgage market will fade sharply as money returns to the riskier -- but higher yielding stock markets.
Tomorrow morning's January nonfarm payroll report could miss forecasts currently calling for a headline job gain of 8,000 and a national jobless rate of 10.1% by a wide margin, because of the impact of one-time factors including annual statistical benchmark revision and the direct impact of colder-than-normal winter temperatures on construction and other outdoor employment categories.
Government data wonks are going to make statistical revisions to the number of jobs they guesstimated were lost in 2009 - and the number of jobs the year-end hard figures reflect. Most analysts believe this "adjustment" will result in an increase in the number of job lost for the calendar 2009 of 824,000. This "adjusted" number has been kicked around by market participants for the past couple of weeks -- so as long as the actual value matches up reasonably close -- it probably won't cause much of a reaction among investors.
As the final hours tick down ahead of tomorrow's much anticipated January nonfarm payroll report -- a growing number of analysts are adjusting their forecast to suggest the economy added just 8,000 more jobs than it lost last month - a rather sharp revision from the call for a gain of more than 20,000 jobs that was broadly popular as late as yesterday afternoon. Any positive improvement in the pace of job creation will be a boost for the prospects of further economic recovery - and will tend to put additional upward pressure on mortgage interest rates as capital sources see an opportunity to demand a higher yield for their available investment dollars.
In the convoluted world of the mortgage market lousy jobs reports are almost always supportive of steady to perhaps fractionally lower rates. This time around it will likely take a surprisingly dismal jobs report showing a loss of 15,000 or more jobs together with a national unemployment rate exceeding 10.1% to power a notable move to lower mortgage interest rates.
Monday, February 1, 2010
Monday, February 1, 2010
The Commerce Department reported earlier this morning that consumer spending rose 0.2% in December, a less-than- expected pace as savings jumped to a six-month high. The tightening of the American purse strings developed even as incomes rose 0.4% last month. For the whole of 2009, spending fell 0.4%, the largest drop since 1938.
Boosting consumer spending is critical to putting the economy on a sustainable path to recovery. Until the national jobless rate is driven below 10% -- it will probably be easier to convince a 7th grade boy to walk up to a 7th grade girl talking with her friends and ask her to dance - than it will be to induce American households to ramp up spending. Granted, there are a few that will jump out there and begin spending as if money grows on trees - but like the majority of 7th grade boys - the rest of the American households will be content to wait a couple more years before they even consider anything so foolish. If this dramatized scenario proves more accurate than not, the sustainability of the economic recovery remains in jeopardy - and that is a condition that will tend to limit the upward pressure on mortgage interest rates.
As expected, the private Institute of Supply Management report on activity levels in the manufacturing sector rose sharply in January. The overall index climbed to 58.4 from December's 54.9. Any reading over 50 is deemed to be an indication of growth in the sector. Measures of orders, production and employment all increased as well. Drilling deeper into the detail of this report it becomes abundantly apparent that a significant part of the surge in the hustle-and-bustle on factory floors last month was more a result of inventory rebuilding following the huge draw-downs of the stock on the shelves of businesses during the depths of the recession last year -- than it was a function of a sharp increase in final demand.
Mortgage investors will keep a close eye on this data series in the months to come - but they are currently willing to discount a large part of the big headline number this time around as a "one-off" event.
Look for volatility in the mortgage market to increase as the week progresses and we get closer to Friday morning's release of the January nonfarm payroll report. Mortgage investors will likely approach this big jobs report from a "better-safe-than-sorry" perspective. A growing number of analysts are suggesting the headline jobs report will show the economy added more than 20,000 jobs than it lost last month. While such a number will be a definite positive for the prospects of further economic recovery - it will almost certainly serve to put additional upward pressure on mortgage interest rates as capital sources see an opportunity to demand a higher yield for their available investment dollars.
Boosting consumer spending is critical to putting the economy on a sustainable path to recovery. Until the national jobless rate is driven below 10% -- it will probably be easier to convince a 7th grade boy to walk up to a 7th grade girl talking with her friends and ask her to dance - than it will be to induce American households to ramp up spending. Granted, there are a few that will jump out there and begin spending as if money grows on trees - but like the majority of 7th grade boys - the rest of the American households will be content to wait a couple more years before they even consider anything so foolish. If this dramatized scenario proves more accurate than not, the sustainability of the economic recovery remains in jeopardy - and that is a condition that will tend to limit the upward pressure on mortgage interest rates.
As expected, the private Institute of Supply Management report on activity levels in the manufacturing sector rose sharply in January. The overall index climbed to 58.4 from December's 54.9. Any reading over 50 is deemed to be an indication of growth in the sector. Measures of orders, production and employment all increased as well. Drilling deeper into the detail of this report it becomes abundantly apparent that a significant part of the surge in the hustle-and-bustle on factory floors last month was more a result of inventory rebuilding following the huge draw-downs of the stock on the shelves of businesses during the depths of the recession last year -- than it was a function of a sharp increase in final demand.
Mortgage investors will keep a close eye on this data series in the months to come - but they are currently willing to discount a large part of the big headline number this time around as a "one-off" event.
Look for volatility in the mortgage market to increase as the week progresses and we get closer to Friday morning's release of the January nonfarm payroll report. Mortgage investors will likely approach this big jobs report from a "better-safe-than-sorry" perspective. A growing number of analysts are suggesting the headline jobs report will show the economy added more than 20,000 jobs than it lost last month. While such a number will be a definite positive for the prospects of further economic recovery - it will almost certainly serve to put additional upward pressure on mortgage interest rates as capital sources see an opportunity to demand a higher yield for their available investment dollars.
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