Monday Market Commentary Feb 1st, 2010: Where are Mortgage Rates Headed

by Alex Stenback on February 1, 2010

Last Week:
The mortgage market suffered through some serious mid-week volatility, but from market close on Monday to market close on Friday, benchmark 30 year rates were unchanged.Yet another reason not to get too wrapped up in the day-to-day swings of the market. 

Against the backdrop of a Fed meeting, State of the Union address, and the confirmation of Ben Bernanke’s second term, the market turned in a week of generally neutral to bond and interest rate friendly reports: Inflation was subdued; housing market news was worse than expected; The Fed stuck to the status quo; GDP was higher but uninspiring; Stocks had a rough month end.

This Week:
The week got of to a rocky start this AM.  Bond prices are moving lower (which leads to higher rates) as the ISM Manufactuirng Index posted a better than expected number, and the Personal Income and Outlays Report showed a very slight firming in the core inflation gauge – the Personal Consumption Expenditure (or PCE) index.

As for the rest of the week, Friday’s employment report will get the bulk of attention - any marked improvement in the employment picture will almost certainly push rates higher. Though do remember, the headline employment rate and payrolls seldom tells the whole story.  The market expects a 10% unemployment rate and 85K jobs lost, but keen observers will be looking for market moving tells like revised figures from prior months, and where specifically (by sector) jobs are being gained and lost.  Negativity in this report could definitely help keep a lid on rising rates.

But before we get to all of the Friday excitement, don’t forget there’s pending home sales; a handful of treasury auctions; the “early” ADP  Report (ADP is a payroll company, whose index is viewed as a leading indicator for employment figures, but has a spotty track record as a “predictor” but widely followed nonetheless;) and public statements by both Treasury Secretary Geithner and former Fed Chairman cum President Obama advisor Paul Volcker.  There’s also a stock market that looks awfully “tippy” and comes off the worst month in a year.

All of which could make this an exciting 5 days, so follow along in Twitter as I unpack the events of the week and their impact on mortgage rates.
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· This Week’s Economic Calendar [Barron's]

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