Monday Market Commentary March 1st, 2010: Tracking Mortgage Rates and What Moves Them

by Alex Stenback on March 1, 2010

Graphic via Jake @ Econompic Data (emphasis mine)

Last week:
The mortgage market rallied last week – benchmark 30 year fixed rates shed roughly .25% with most lenders. That’s the good news.

Bad news is that the improvement was mostly driven by a series of (unexpectedly) glum economic reports.  New and existing home sales dropped in January, by 11.2% and 7.2% respectively.  Weekly jobles claims spiked – almost 500,000 people submited new claims for unemployment insurance.  Consumer confidence is searching for a nadir last marked in the early 80′s, a fact that you don’t need to search any further than the first three sentences of this paragraph to explain.

This Week:
As I type this, the Febraury Personal Income and Outlays report has reported a mixed bag – incomes in January overall were lower than expected, posting a .1% gain.  Spending improved, yet most of the increase was in non-durable goods, like gasoline.  Good news was that prices posted only a 1.4% increase (YOY) denying the grist from inflation mills.

ISM index also reported at 9AM CST (ISM measures conditions at some 300 manufacturing concerns) posted strong readings, but dissapointing in that they are in the lower end of the expected range after 3 straight months of healthy gains.

Highlights for the rest of the week follow, but don’t overlook the fact that Canadian, European, and British central banks all announce any changes to monetary policy this week – this can and often does impact our domestic credit markets.  from the calendar:

Wednesday:

  • ADP Empoloyment Report [8.15AM]  This report, by leading payroll company ADP, leaves out government jobs, but is regarded as an early-look at Friday’s official employment report.  Spotty track record as a leading indicator but can move markets.
  • Beige Book [2PM] A survey of business conditions within each Fed district – generally a second tier report with only moderate impact on credit markets.
  • ISM Non-manufacturing Index [10AM] Non-manufacturing may make this report sound lightweight, and while it does get less attention than the ISM Manifacturing index, it covers some important industries like construction, agriculture, mining, and transportation.  A rebound in this report, which generally lags ISM could hurt mortgage rates.

Thursday:

  • Weekly Jobless Claims [8.30Am] This report has been on a bad run recently, with weekly average claims approaching a half million.  Bad news is usually good news for mortgage rates here.
  • Productivity [8.30AM] Within this report, unit labor costs get a lot of attention as a barometer for inflation, so it bears watching.
  • Factory Orders [10AM] New orders and shipments have been steadily rising since marking a low of -20% last summer.  Markets expect a 2% increase – a high profile miss here could be rate friendly.

Friday:

  • Employment Report [8.30AM]  The most important number of the week, in all likelihood, requires the least elaboration. Unemployment is expected to increase slightly to 9.8%, and the economy is expected to have shed 20k jobs. A spike in either figure would probably help mortgage rates.

This Week’s Full Economic Calendar [Barron's]
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If you are following mortgage rates you should be following me on Twitter, for in the moment and on the fly updates on what’s happening in the mortgage market.

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