Mortgage rates notched some very slight improvement early on last week, only to finish mostly unchanged.
Early in the week, bond prices were lifted and interest rates dropped as money flowed from the stock market and into the safe haven of bonds as investors feared the dual effects of a possible bailout of Fannie/Freddie and the impact of a then still building Hurricane Gustav.
On Thursday and Friday, mortgage bonds gave back much of their gains as a strong GDP report and the PCE (Personal Consumption Expenditures index – a key measure of inflation) showed the highest inflation reading since 1991 and falling personal incomes. This caused rates to tick back up and finish the week unchanged.
Two items stand out on the economic calendar in this holiday shortened week.
Monday 9/2: ISM Index. A measure of manufacturing sector strength. A strong number here could hurt mortgage rates.
Friday 9/5: August Employment Report. Expectations are that the economy shed 75K jobs in August. Anything substantially higher than this may help mortgage rates improve. On the number, or better, and rates could rise.
Beyond the economic calendar, the bond market is flashing some ugly technical signals, and the direction of stocks and oil prices may prove to be significant drivers this week. The path of least resistance seems to be for rates to drift higher.