Tuesday Market Commentary, September 8th 2009: Where are mortgage rates headed?

by Alex Stenback on September 8, 2009

Monday Market Commentary is a weekly post on the week ahead in the mortgage market.  I’ve published this here since 2004 with one thought in mind:

Deciding when to lock your rate is not about knowing where rates are going, but about understanding the market, what has the potential to move rates, avoiding dumb risks, and taking smart ones.
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Last Week:
In a week that showcased a number of economic reports that indicated improvement or “not as bad as expected” results, the fact that mortgage rates managed slight improvement should be considered a victory, and we can thank the lackluster performance of stocks.

Pending home sales continued to point to a bottom in the number of homes sold, the minutes of the last Fed meeting showed increasing confidence that the downturn is coming to an end, and the August Employment report posted a better than expected 216K jobs lost.

Reports like those would normally send stocks on a romp, and pressure mortgage rates higher. But the stock market never really found it’s footing and the mortgage market held on to gains from earlier in the week despite a mild selloff on Friday after the employment report was released to near-empty pre-holiday trading desks.

This Week:
A light week ahead for the economic calendar, which mostly contains second-tier reports, a few speeches by Fed officials, and a handful of treasury auctions, so I’d expect the bond markets, and mortgage rates, to remain levered to the stock market this week.

Wednesday’s (2PM) Beige Book (a compilation of anecdotal reports from the 12 Fed districts, released two weeks prior to each FOMC meeting) is seen as an inside peak at some of the data the Fed will use to set interest rate policy.  Reports of economic strength here could portend rate increases.  Consumer sentiment, for Friday, can also move stocks if the consumer shows optimism, and bears watching.

This Week’s Economic Calendar [Barron's]
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