Despite a week in which the economic news could not have been more dour – a climate which normally bodes well for lower interest rates – mortgage rates were unable to make any meaningful progress lower.
Beyond the poor economic picture that is taking shape, a decline in mortgage rates was arrested by lingering concerns over the level of Federal backing Fannie and Freddie have – government officials made clear that though they stand behind "Frannie" they do not enjoy a full faith and credit guarantee.
That means that mortgage backed paper is less attractive than other investments, such as treasury securities and FDIC guaranteed bank deposits that carry such guarantees. Demand suffers as a result, keeping mortgage rates higher than they could be.
There were also some technical factors at play here – mortgage bond pricing is up against a couple of stout resistance points – making any improvement difficult.
The economic calendar this week gives markets participants a full helping of data to consume and assimilate. The data is expected to reflect a weak and recessionary economy.
Tuesday and Wednesday, we'll get a reading on inflation at both the wholesale and street level via the producer and consumer price indices. Thursday's Philadelphia Fed index will provide a measure manufacturing activity. Weakness in manufacturing and an absence of inflation would be beneficial to the cause (lower rates.)
Wedensday's report on housing starts and building permits is expected to show a construction industry in full retreat.
The political/financial tides will also be in full flow this week as issues such as an automaker bailout, the growing line for government largesse, and the shape of future efforts at re-ballasting the economy are earnestly debated by politicians, industry leaders, and television's yakker class.
At any rate, a poor economy generally presents the proper conditions for rates to staw low or decline, but be aware that political/finacial events in the short term can cause mortgage rates to oscillate, so a cautious approach is warranted when considering when to lock in.
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