Monday Market Commentary: Rates Creep Higher

by Alex Stenback on April 6, 2009

Last Week:
Mortgage rates were caught in an updraft generated by a small revision in mark-to-market accounting rules that allows banks flexibility in how they value certain assets.  This news emboldened stock investors.  As money rotated out of bonds, 30 year mortgage rates were pushed higher by .125-.25%.

This despite an employment report that was terrible: 663K jobs lost in March and 3.3 Million jobs lost in last 5 months.

Much (maybe too much) has been made of the Mark-to-Market changes, and getting behind the headlines is interesting.  The blog Accrued Interest has an excellent post that unwinds some of the conventional wisdom and headline driven optimism over the changes.

This Week:
Bond markets close early on Thursday, and are closed Friday to observe the Easter holiday.  The economic calendar offers little red meat for the markets but for the release of the Minutes of the last Fed meeting (Wed, 2:00 PM ET), which is worth watching.

Bonds this week will trade against the backdrop of of almost $60 billion in new supply being issued by Uncle Sam.  That is a big number.  As regular readers know, lots supply in the bond market very often results in higher mortgage interest rates.

This week also marks the beginning of earnings season, in which first quarter earnings are reported.  It will be interesting to see whether the optimism expressed in the recent climb of the major stock indexes will be confirmed by actual earnings – if they are, bonds and mortgage rates may suffer.  If earnings or earnings prospects dissapoint, bonds may recoup recent losses and bring mortgage rates lower.
This Week’s Ecomonic Calendar [Barron's]
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Watching Rates? If you are following mortgage rates, don’t forget to subscribe to my RateWatch Twitter feed.  It’s posted in real time in the center column, or you can grab the feed directly and have updates piped to your phone, RSS reader, IM, or Twitter account.

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