The Fed has again walked back it’s prediction for 2011 GDP, which started the year at 3.9% and now is at 2.9%. Hitting that number will require things pick up between now and year-end. Unemployment/employment fails to improve and chugs along at recessionary levels, while Europe dithers over Greece and other sovereign-European basket case economies. China inflation which would in part mean US inflation looms.
Net result here is investors seek safety, driving mortgage and other rates lower.
Markets have a full hopper to sort through, as the economic calendar prints a number of key reports on inflation (Personal Consumption/Expenditures, Monday 0830,) Manufacturing (Chicago Purchasing Managers Index, Thursday ) and Housing (Pending Sales – Wednesday.) Negativity in any or all will normally favor stable to lower mortgage rates.
Thursday’s weekly jobless claims will also garner some attention – this report in particular has been trending higher than probably anyone expected or is comfortable with – averaging over 400K per week. The longer these numbers stay elevated, the longer the road back to a better employment situation, but when they start to turn a corner, it may be the first indicator that higher rates are incoming.
As a backdrop, Treasury auctions 2′s, 5′s and 7′s (Treasury Notes) to the tune of $99 Billion this week, which may also influence rate movements.
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