MARKET COMMENT Mortgage bond prices fell last week, which pushed mortgage interest rates considerably higher. There was a strong sell-off following the stronger than expected ADP employment figures. The losses continued as the weekly jobs data Thursday and the payrolls component of the employment report Friday both came in stronger than expected. Stocks were volatile but generally saw improvements on the week. Mortgage bonds ended the week worse by over a full discount point.
The bond market is closed Monday for Columbus Day. The financial markets may be volatile Tuesday when trading resumes following the extended holiday weekend. Analysts will watch the Treasury auctions carefully for foreign demand. The weekly jobs report and retail sales data will receive a lot of attention.
• Columbus Day; Oct. 10; Important. No trading Monday. Shortened trading week may lead to volatility when trading resumes Tuesday.
• 3Y Treasury Note Auction; Oct. 11; Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
• Fed Minutes; Oct. 11; Important. Details of the last Fed meeting will be thoroughly analyzed.
• 10Y Treasury Note Auction; Oct. 12; Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
• Weekly Jobless Claims; Oct. 13; Consensus Estimate 425k; Important. An indication of employment. Higher claims may result in lower rates.
• Trade Data; Oct. 13; Consensus Estimate $44.5b deficit; Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
• 30Y Treasury Bond Auction; Oct. 13; Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
• Retail Sales; Oct. 14; Consensus Estimate Up 0.1%; Important. A measure of consumer demand. Weakness may lead to lower mortgage rates.
• U of Michigan Consumer Sentiment; Oct. 14; Consensus Estimate 59.2; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
FED MINUTES The Federal Open Market Committee decided in December of 2004 to reduce the lag time between the open market committee meeting and the release of the minutes from six to eight weeks to only three weeks. The minutes from the meeting have the ability to cause mortgage interest rate volatility because they provide more policy details than the standard post meeting release. Most importantly the minutes provide the Fed’s complete economic analysis and the various opinions of individual Fed members. There is typically an overwhelming consensus among the members. However, there can also be dissension, which often causes uneasiness in the financial markets. The release often comes and goes without much uproar but keep in mind that if any of the text seems troubling to analysts you can see market volatility. Remember that mortgage interest rates remain historically favorable. Capitalizing on current levels is wise amid the continued economic instability across the globe.
Source: F&M Mortgage, Todd Kabel; Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee