Monday Market Commentary: Mortgage Rates Manage Slight Improvement Last Week.

by Alex Stenback on October 20, 2008

Last Week:
Another volatile week in the mortgage markets.  Early in the week, mortgage rates went up as banks and other financial institutions raced to sell high quality mortgage assets to raise capital and reduce their exposure to loans – known as deleveraging.

The second half of the week was punctuated by a stream of increasingly bearish economic data, with notably poor showings in Retail Sales, the Beige Book, and the Philadelphia Fed index.  These reports, when combined with a moderating inflation outlook, helped mortgage rates claw back from earlier losses and lock in a slight improvement – .125% or so – for the week.

This Week:
A sparse economic calendar awaits this week.  Existing home sales (Friday, 10:00AM) and Weekly Jobless Claims being the most notable upcoming reports.

However, lots of high profile earnings reports hit Wall Street this week, which will move stocks.  Stock movements typically have second-order effects on the mortgage bond market and by extension mortgage rates. 

Though we must note that recently the "if stocks do poorly bonds/interest rates improve" correlation has broken down, so stock movements may prove to be an especially poor way to gauge the direction of rates in the coming weeks.
This Week’s Economic Calendar [Barrons]
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