MARKET COMMENT Mortgage bond prices fell last week pushing mortgage interest rates considerably higher. Turmoil in many of the oil producing countries continued to push oil prices higher. Weekly jobless claims came in significantly lower than expected which sent mortgage interest rates higher as stocks recovered. The employment report Friday was slightly better than expected, however bond prices did not suffer. Traders were relieved the data did not mirror weekly jobless claims and show a surge in job creation.
Mortgage bonds ended the week worse by a 5/8 of a discount point.
The foreign demand for the Treasury auctions will continue to factor into trading this week. Rates may improve if foreign central banks continue to support our debt auctions. However, the opposite is also true, weak demand will pressure rates higher.
- Consumer Credit; March 7; Consensus Estimate $5.5b; Low importance. A significantly large increase may lead to lower mortgage interest rates.
- 3-year Treasury Note Auction; March 8; Important. $32 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
- 10-year Treasury Note Auction; March 9; Important. $21 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
- Weekly Jobless Claims; March 10; Consensus Estimate 375k; Important. An indication of employment. Higher claims may result in lower rates.
- Trade Data; March 10; Consensus Estimate $41b; Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
- 30-year Treasury Bond Auction; March 10; Important. $13 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates.
- Retail Sales; March 11; Consensus Estimate Up 0.4%; Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
U of Michigan Consumer Sentiment; March 11; Consensus Estimate 76; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
- Business Inventories; March 11; Consensus Estimate Up 0.7%; Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates.
FUNDAMENTAL WEEK The abundance of fundamental data this week provides a good opportunity for mortgages to improve. If the data shows weakness in the economy with little or no inflationary pressures then it is possible for mortgage bonds to rally resulting in mortgage interest rate decreases. However, if the data shows that the economy continues to rebound or any significant signs of inflation, mortgage bonds may fall pushing mortgage interest rates higher.
Mortgage interest rates remain historically favorable despite some recent increases. Now is a great time to avoid the uncertainty surrounding continued market volatility. Remember, 6 months ago the majority of analysts thought rates would continue to fall. The future is uncertain with so much global economic instability. Escalating energy prices currently dominate headlines. We have been able to avoid any rate hikes typically associated with that but it is very possible for rates to spike higher in the short term. Caution is key!