Tougher to write a weekly roundup with the horrifying situation in Japan still unfolding. But for the grace of god (or dumb luck, should you prefer) go we – a stark reminder that this is a violent planet. The show must go on.
Mortgage rates improved last week, slightly, at most .125%. “Flight to quality” was the prevailing theme – any time there is political or financial trouble, investors move money away from risk, and into safe-havens. And there’s plenty of “trouble:” Japan, a smoldering Middle East, early signs of a slowdown in China, and a looming debt crisis in Europe that will fight with Japan for front page space in the coming weeks.
Right now, the safest of safe havens is United States Treasury debt – so yields dropped all week, and mortgage rates took advantage of the spillover and dropped a little. Both are at or near four month lows.
A big week – against the backdrop of Japan, which will obviously dominate headlines, the markets will try to follow the economic calendar’s version of around-the-horn as we get snapshots of nearly every facet of the economy: Monetary policy, inflation, real estate, employment, and manufacturing/industry will headline the marquis at various points this week.
Say it with me: Good for economy, bad for mortgage rates. Inflation spurts higher? Rates will rise.
[Tuesday] Fed Policy Statement and Rate Decision:The Fed is not going to touch short term interest rates until at least 2012, but investors will be alert to any subtle shifts in language within the policy statement – any surprisingly positive economic statements or emphasis on inflation may spook mortgage rates higher.
[Tuesday] NAHB Housing Market Index- A gauge of home-builder sentiment. Still at very low levels. Probably a non-event. A miraculous spike in optimism would still register as very pessimistic in the larger scheme.
[Wednesday] Feb. Housing Starts – This have been going sideways at decades-old lows since the 2007 collapse. No meaningful improvement – something on the order of 560,000 units are expected. These are 60′s era numbers. REALLY low.
[Wednesday] Producer Price Index – A measure of wholesale prices. Higher energy costs will push the headline number up here, but once volatile food/fuel components are stripped from the data, expect little evidence of “core” inflation. An unexpected spike in this number, especially the core component, could send rates higher.
[Thursday] Consumer Price Index – Expect a similar story to PPI: Energy and food push the headline higher, but core remains fairly flat. A hot reading here (especially in the core/ex food-energy component) could easily spike mortgage rates.
[Tuesday] Empire State Mfg. – NY Manufacturing is used here as a proxy for national conditions. This data has shown decent strength and growth, though there has been precious little carryover into labor markets (jobs.)
[Thursday] Industrial Production – The biggest number of the week. Early indications are this will be a strong number, and that is what the markets will expect. A disappointment here could will help mortgage rates ease.
[Thursday] Philly Fed Survey- A leading indicator for Industrial production. Has been uptrending – hit a 7 year high last print. Many expect this to moderate, but if it continues to grow, higher rates may result.
[Thursday] Initial Jobless Claims- Weekly jobless claims have been mostly downtrending – last week was an exception, as claims rose by 26K to 397K. The 4 week average is the most important figure here, so as long as it stays below 400K, there should be no surprises.
View this Week’s Full Economic Calendar [Econoday]
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About: Alex Stenback is an active mortgage banker with over 12 years experience in the Twin Cities of Minneapolis/Saint Paul [612.749.6999 | http://about.me/alexstenback ]