Mortgage rates eased slightly last week as the economy continued to cough up fresh evidence that the downturn may be more severe, and more prolonged, than initial (rosier) predictions suggested.
The employment report showed the unemployment rate topped 8% and the US shed 651K jobs in February and (thanks to downward revisions of prior months) over 2 Million jobs in the past four months.
Nonetheless, bond markets struggled to overcome supply issues, which continue to put a floor under mortgage rates despite the woes of the economy. Too many bonds floating around keep bond prices low and rates high.
The economic calendar is relatively light – Thursday’s retail sales report is expected to be weak, and few will be surprised if it is very weak. Thursday’s weekly jobless claims will be notable only if it marks a substantial decline, and the fickle Consumer Sentiment prints on Friday.
Suppy will continue to drive the bond markets as the Treasury will auction $148 Billion dollars in bills, notes, and bonds this week. That is a huge, horse-choking number which may make it very difficult for mortgage rates to post any gains – the Federal government is effectively soaking up all of the demand for safe-haven investment, and may wind up paying a bit of a premium at that.
Against that backdrop, we’d expect interest rates path of least resistance to be to higher, if only modestly so, unless we see fresh evidence of credit market stress or severe economic malaise.
This Week’s Economic Calendar [Barron's]