A bailout of Bear Stearns, stock volatility, a .75% rate cut by the Fed, hotter than expected wholesale inflation, and easing of capital restraints on Fannie and Freddie combined the send mortgage rates on another roller-coaster last week. But the good news is that by the time bond markets closed early on Thursday, fixed rate conforming mortgages managed a quarter-point improvement.
Early in the week, a raft of housing data is on the economic calendar. Existing home sales, the Case-Schiller home price index, and new home sales, print on Monday, Tuesday, and Wednesday, respectively. On Friday, we’ll get a glimpse of perhaps the most important data point of the week, the PCE, or personal consumption expenditures index, which is a key yardstick for inflation at the consumer level. A hotter than expected reading here could send rates higher.
All of this is set against the backdrop of the fragile financial markets. Have recent Fed actions been enough to restore stability, or are we just waiting for the next body to float to the surface? Movements in the dollar, and in mortgage-backed securities (improvements in either may signal renewed investor confidence) may just hold the answer to that question. A tame read of inflation via the PCE and renewed buy-side interest in mortgage backed securities would help mortgage interest rates this week. What else would help? No more financial market mayhem and meltdown.
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