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Market Comment for Week of February 8th

MARKET COMMENT  Mortgage bond prices rose last week pushing mortgage interest rates slightly lower. Reignited fear of a global economic meltdown sent money into the mortgage bond market in flight to quality buying. The news reports were permeated with worries about European debt payment defaults. Greece and a few other countries were noted as specific concerns. The employment report Friday morning was mixed with unemployment not as bad as expected but a larger than expected drop in payrolls. For the week interest rates fell by about 1/4 of a discount point. 

The record debt issuance continues with billions of dollars worth of notes and bonds set for auction this week. Strong foreign demand will likely help the entire bond market. With the recent “revisions” to employment data the weekly jobless claims data will carry a bit more weight than usual. Retail sales figures will be the headline figure this week. 

LOOKING AHEAD

Economic
Indicator		 Release
Date and Time		 Consensus
Estimate		 Analysis
3-year Note Auction Tuesday,
Feb. 9,
1:00 pm, et		 None Important. $40 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Trade Data Wednesday,
Feb. 10,
8:30 am, et		 $35 billion deficit Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
10-year Note Auction Wednesday,
Feb. 10,
1:00 pm, et		 None Important. $25 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday,
Feb. 11,
8:30 am, et		 475k Important. An indication of the employment situation. Higher claims could lead to lower rates.
Retail Sales Thursday,
Feb. 11,
8:30 am, et		 Up 0.4% Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
Business Inventories Thursday,
Feb. 11,
10:00 am, et		 Up 0.4% Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates.
30-year Bond Auction Thursday,
Feb. 11,
1:00 pm, et		 None Important. $16 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates.
U of Michigan Consumer Sentiment Friday,
Feb. 12,
10:00 am, et		 74.6 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

EMPLOYMENT REVISION  The employment report is one of the biggest, if not the biggest, data releases each month. Last week’s employment report came with more twists than usual. Unemployment came in at 9.7%, a sharp drop from the expected 10% mark. Payrolls fell 20,000, weaker than the expected 15,000 increase. This divergence happens from time to time with the data derived from two completely different surveys. One piece of the report that caused major concern was the annual benchmark update, which showed the economy lost 930,000 more jobs than previously estimated in the 12 months ended March 2009. The revised number was very large and basically indicates 2009′s employment situation was worse than most thought. 

A few things that call into question the accuracy of the data influenced this report. Some analysts argued the hiring of temporary census workers threw the figures off. The data was received with a lot of uncertainty and resulted in some wild market swings immediately after the release. The initial reaction sent bond prices lower and interest rates higher. However, the bond market rebounded a bit after digesting the data for an hour or so. This was a prime example of the volatility that often occurs with major data releases.

 Source:  Todd Kabel, US Bank, Nashville, Tennessee

February 8, 2010 Posted by | economy, real estate | , , , , , , , , , , , , , , | 1 Comment

   

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