Market Comment
Mortgage bond prices rose last week pushing mortgage interest rates lower. We were negative through Thursday, as stocks performed generally well until Friday’s data was released. Fortunately, bond prices surged higher Friday morning following the weaker than expected payrolls component of the employment report. In addition, news of a troubled Hungarian economy reignited global fears and resulted in flight to quality buying of US debt instruments. Stocks fell precipitously Friday.

Rates fell by about 1/2 of a discount point for the week.

The retail sales data will be the most important release this week. The US Treasury auctions will also factor into trading along with the global economic uncertainty. The Euro remains especially volatile. If additional countries announce economic trouble the flight to quality buying of US debt instruments could continue.

Warning of Higher Rates
Last week Atlanta Fed’s Lockhart said that the Fed might need to raise rates to counter inflation even with high unemployment. “Good policy, even in circumstances of unacceptable levels of unemployment, may incorporate higher interest rates. The time is approaching when it will be appropriate to consider recalibrating interest rate policy.” He added, “as the economy continues to improve and financial markets find firmer ground, extraordinarily low policy rates will not be needed to promote recovery and will become inconsistent with maintaining price stability.”

Lockhart noted inflation remained under control for now. Now is a great time to take advantage of mortgage interest rates at these historically low levels to avoid future market fluctuation, especially with the recent rate decline and Fed predictions.

Market Comment
Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading was dominated by foreign influences as the Greek debt concerns spread throughout Europe. Analysts point to Spain and Portugal as additional areas of concern. Fortunately, this sent global investor funds into US Treasury bonds and mortgage-backed securities. This flight to quality buying helped rates improve this week. Weekly jobless claims came in as expected.

Rates fell by about 3/8 of a discount point for the week.

This Friday’s employment report will be the most important event this week. Thursday’s productivity data will also be key. Significant data release often leads to mortgage rate fluctuation.

Income and Outlays
The personal income and outlays release is a monthly report issued by the Bureau of Economic Analysis (BEA). The data is important because it provides a solid indication of future consumer demand. The personal income component is primarily a measure of wages and salaries. The outlays component is primarily a measure of spending on goods and services. Together the figures provide analysts valuable insight into consumer economic standing and consumption.

The prior release showed wages and salaries were unchanged. Future decreases could adversely affect consumer spending and the entire US economy. Decreased or stagnant wages coupled with tighter borrowing restrictions make it difficult for consumers to spend money.

It is important to note that no single economic indicator can consistently predict the future of the economy. However, the personal income and outlays report is a closely watched release. The consumer remains a vital component of the US economy.

Now is a good time to take advantage of mortgage interest rates at their current levels to avoid exposure to future movement.

Market Comment
Mortgage bond prices fell last week, pushing mortgage interest rates higher. The first portion of the week had very little data. Leading economic indicators came in stronger than expected which didn’t really help us. Strong stocks put slight on mortgage bonds. Producer prices rose more than expected but the core rate was tame. New home sales shocked the market with a 26.9% increase. This was the largest increase in 47 years and not bond friendly.

Rates rose by about 3/8 of a discount point for the week.

This Wednesday’s Fed meeting will be the most important event this week. The Treasury auctions will also likely overshadow a lot of the other releases as traders digest record debt that continues to hit the market. Friday morning may be volatile as the employment cost index and gross domestic product data are very important releases.

Consumer Confidence
The Conference Board releases the Consumer Confidence Index on the last Tuesday of every month. The report details the levels of confidence individual households have in the performance of the economy. The data is derived from a survey of 5,000 households nationwide. The survey polls consumer opinions on the current business conditions, their jobs, their incomes, and their future spending plans.

The consumer confidence index is significant in that it provides a precursor into consumers’ willingness to spend in the months ahead. However, many analysts point out that willingness to spend does not always convert to actual sales.

This week’s release will be eagerly anticipated. Look for any variation from estimates to cause mortgage interest rate fluctuation. Signs of eroding consumer confidence could lead to improvements in mortgage interest rates. However, stronger than expected figures could spike rates higher.

Market Comment
Mortgage bond prices rose last week, which helped mortgage interest rates improve. Oil prices continued to fall early in the week. Fortunately, mortgage bonds rallied nicely amid the tame inflation environment. However, that trend reversed mid week as oil prices spiked due to a report which indicated a supply decline. Stocks also surged higher as earnings reports generally pleased investors. The DOW easily eclipsed the 11,000 mark.

Despite this, rates still managed to improve by about 1/4 of a discount point for the week.

Today’s leading economic indicators data will set the tone for trading this week. The producer inflation data will be the most important release. If inflation pressures emerge mortgage interest rates may be pressured higher.

Durable Goods Orders
Durable goods orders are generally believed to be a precursor of activity in the manufacturing sector because manufacturing must have an order before considering an increase in production. Conversely, a decrease in orders eventually causes production to be scaled back; otherwise the manufacturer accumulates inventories, which must be financed.

Unfortunately, durable goods orders data has many drawbacks. The first problem with the orders data is that it is extremely volatile. This is usually attributed to the civilian aircraft and defense components of the figure. For example, if Boeing has a big order for one of its jumbo jets, the civilian aircraft category can change by $3-4 billion. The same scenario is evident when an aircraft carrier is ordered, surges in the defense category result. The second problem with the data is that orders are continuously being revised. There have been many times when the advance report on durables showed an increase, while a revision a week later showed a decrease. The revised data is found in the report on manufacturing orders, shipments, and inventories.

Since the data is difficult to forecast, there is quite often a huge disparity between the actual release and the initial projections. If the durable goods report is much stronger than expected, look for mortgage interest rates to push higher. If favorable, the data may help interest rates remain steady or even push lower.

Market Comment
Mortgage bond prices rose last week, which helped mortgage interest rates improve slightly. The first portion of the week was generally bond friendly as the Fed minutes showed real concern about the economy’s ability to recover with so many job losses. Stocks and bonds generally traded inversely as the DOW tested the 11,000 mark a few times during the week in up and down trading. Unfortunately, a large portion of the improvements was erased as oil prices traded around $87/barrel and inflation fears emerged.

Rates still managed to improve by about 1/4 of a discount point for the week.

The consumer price index Wednesday will be the most important release this week. The abundance of important economic releases has the potential to result in a very volatile week for mortgage interest rates. If the data shows signs of weakness, we could see rates improve.

Oil
Inflation fears tied to rising energy prices have reemerged. At one point oil prices rose near $87/barrel last week causing many analysts to revise forecasts. Goldman Sachs and Morgan Stanley both predict oil prices will rise above $100/barrel next year. The concern is that rising energy costs could permeate through the markets and damage economies around the globe that are struggling to regain footing. Inflation, real or perceived, generally erodes the value of fixed income securities causing prices to fall and rates to rise. This could pressure mortgage interest rates higher further stifling a recovery in the US housing sector.