After some improvement early in the week driven be deteriorating economic prospects, mortgage bonds were unable to sustain any sort of meaningful price rally, and gave back their earlier in the week gains by the time trading ceased on Friday. All this despite a selloff in stocks, which normally helps mortgage bonds, and rates.
As a result, mortgage rates finished the week essentially right where they started.
The biggest event on the calendar this week is the Federal Open Market Committee meeting, which concludes on Wednesday with a rate decision and policy statement. The market seems to have priced in a .5% cut to the Federal funds rate, and we may see another round of rate cuts by central banks around the globe to buttress the still-ailing financial system.
This is a good time to remind everyone that the Fed does not control mortgage rates, and that any Fed rate decision and policy statement can push markets in ways we cannot predict – in fact, 8 times out of ten, when the Fed cuts rates, mortgage rates rise.
As for the economic calendar proper, New Homes Sales report this morning – though we are betting against, it will be interesting to see if the increase in existing home sales will carry through to new homes.
Durable goods orders print on Wedensday, Gross Domestic product on Thursday, and Personal Consumption Expenditures on Friday. All three of these reports bear watching, and could be market movers as all eyes look for further confirmation/evidence of an economy in recession.
This Week's Economic Calendar [Barron's]
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