MARKET COMMENT Mortgage bond prices rose slightly last week pushing mortgage interest rates lower. The data was mixed. Housing starts, existing home sales, and leading economic indicators data were all higher than expected which didn’t bode well for mortgage bonds. However, weekly jobless claims and the Philadelphia Fed business conditions index were both bond friendly. We rallied nicely Tuesday as stocks struggled a bit that day and most of the small gains for the week came from that. Mortgage bonds ended the week better by about 1/8 of a discount point.
The US Treasury will auction 2, 5, and 7-year notes this week. If foreign demand for US debt remains strong rates should stay the same or improve.
- New Home Sales; April 25; Consensus Estimate 245k; Important. An indication of economic strength and credit demand. A decrease may lead to lower rates.
- Consumer Confidence; April 26; Consensus Estimate 63; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
- Durable Goods Orders; April 27; Consensus Estimate Up 1.5%; Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
- Fed Meeting Adjourns; April 27; Consensus Estimate No rate change; Very Important. Few expect the Fed to raise rates yet, but some volatility may surround the adjournment of this meeting.
- Q1 Advance GDP; April 28; Consensus Estimate Up 1.7%; Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
- Weekly Jobless Claims; April 28; Consensus Estimate 400k; Important. An indication of employment. Higher claims may result in lower rates.
- Personal Income and Outlays; April 29; Consensus Estimate Up 0.4%, Up 0.5%; Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
- PCE Core Inflation; April 29; Consensus Estimate Up 0.2%; Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
- Q1 Employment Cost Index; April 29; Consensus Estimate Up 0.5%; Very important. A measure of wage inflation. Weakness may lead to lower rates.
- U of Michigan Consumer Sentiment; April 29; Consensus Estimate 69; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
BERNANKE PRESS CONFERENCE The Fed meets next week with results Wednesday afternoon. In an effort to increase transparency Fed Chairman Bernanke will hold a press conference following the results. This is a major change in Fed protocol in that prior meetings had the Fed announce the results with only a brief statement. Bernanke’s foreign counterparts regularly hold press conferences. However, many analysts and even Fed officials themselves have concerns about this change. They worry Bernanke may unintentionally say something that rattles the financial markets. Bernanke will try his best not to cause instability but the press conference will definitely be an event to watch carefully.