Market Comment
Mortgage bond prices rose last week pushing mortgage interest rates lower. Consumer confidence came in weaker than expected, helping rates rally Tuesday morning. The ADP employment release showed more job losses than expected. The employment report Friday morning confirmed the ADP payroll data indicating the US economy shed 263,000 jobs in September.

For the week, interest rates fell by about 7/8 of a discount point.

Another round of Treasury auctions hits the market this week. Solid foreign demand will help rates remain the same or improve. Signs that foreign demand is diminishing will not bode well for mortgage interest rates. On Thursday, the weekly jobless claims will be released and will carry more weight than usual due to the lack of other economic data.

Mortgage Rate Factors
Everyone’s financial situation is unique, which makes the mortgage that is best suited for each person unique as well. Factors such as down payment, the time one plans to spend in their home, credit rating, income structure and debt ratios all factor into the equation. In addition, these factors make comparing your mortgage rate to someone else’s rate complex. And of course, when evaluating a mortgage, rate is just one piece of the pie.

A mortgage professional is able to take all of these unique variables and provide options that work best for each individual. Working with the right professional ensures a borrower’s success throughout the loan. Making wise financial decisions today paves the way for a safe and secure future.

Market Comment
Mortgage bond prices fell last week pushing mortgage interest rates higher. Stronger than expected data and positive stock movements pressured rates. The Institute for Supply Management (ISM), factory orders, weekly jobless claims, and employment report all came in stronger than expected. The personal income and outlays data was the only release that was even near expectations. Signs of an economic recovery carrying continued record debt had many traders concerned about inflation implications.

For the week, interest rates rose by about 2 full discount points.

The record debt auctions will continue to pressure mortgage interest rates. If foreign demand does not falter, then mortgage interest rates will likely stay neutral or improve. While if foreign demand is weak, rates will take a negative turn.

Employment Surprise
The employment report is generally the most important data released each month. Last week’s employment report shocked analysts when all three components came in better than expected. Unemployment came in at 9.4%, stronger than the expected 9.6% mark. Non-farm payrolls fell 247k, not as weak as the expected 320k decline. Average hourly earnings rose 0.2%, stronger than the expected 0.1% increase.

Unfortunately, mortgage interest rates got worse by over 1/2 a discount point instantly following the release. Be cautious as economic uncertainty continues. As we saw last week, rates can spike quickly.

Market Comment
Mortgage bond prices rallied early in the week, only to give back the gains as stocks surged. The DOW eclipsed the 9000 mark. Ben Bernanke spoke of a “jobless recovery”, where employers use productivity to increase production without additional labor. This would maintain a high unemployment rate even after the economy is in recovery.

Existing home sales data came in higher than expected. For the week, interest rates rose by about 1/8 of a discount point.

The US Treasury will auction $115 billion of 2, 5, and 7-year notes this week. The additional debt supply may pressure rates. With so many data releases, expect the market to move.

Employment Cost Index
The employment cost index is a quarterly report issued by the Department of Labor. The report measures the growth of wages, salaries, and benefits costs over a certain period of time. Though ECI figures are usually weeks old, the data remains the best indicator of employment price pressures because it factors employees’ total compensation.

If wage pressures rise, expectations of inflation will increase. However, increasing compensation does not necessarily lead to increased inflationary pressures. Oftentimes, increased productivity enables employers to increase compensation without increasing the costs of their goods or services.

No single economic indicator can consistently predict the future of the economy. However, the employment cost index is a closely watched release. Most of the recent Fed releases and speeches indicate that inflation is a concern. Market participants remain cautious. Now is a good time to take advantage of mortgage interest rates at their current levels to avoid exposure to future market fluctuation.

Market Comment
Mortgage bond prices moved considerably this week with rates rallying midweek as additional Treasury debt was absorbed. Foreign demand for the shorter-term auctions was surprisingly strong, while the longer-term auction was average. The US Treasury auctioned $963 billion of debt the first half of this year and is expected to offer $1.1 trillion in the second half. Weekly jobless claims were better than expected, which did not help mortgage bond prices. However, falling oil prices eased inflation fears and enabled mortgage bond prices to increase, which pushed rates lower. Oil was under $60/barrel last Thursday morning.

For the week, interest rates improved by about 1/2 of a discount point.

The consumer price index data Wednesday will be the most important data this week. Signs of inflationary pressures from any of the data releases will not bode well for mortgage interest rates.

Fed Minutes
In December 2004, The Federal Open Market Committee decided to reduce the lag time between the open market committee meeting and the release of the minutes from six weeks to only three weeks. The minutes from the meeting have the ability to cause mortgage interest rate fluctuation because they provide more policy details than the standard post meeting release. Most importantly, the minutes provide the Fed’s complete economic analysis and various opinions of individual Fed members. There is typically an overwhelming consensus among the members. However, there can also be dissension, causing uneasiness in the financial markets. The release often comes and goes without much uproar but if any of the text seems troubling to analysts, you can expect market changes.

Mortgage interest rates remain at historic lows. Capitalizing on current levels is wise amid the recent economic instability across the globe. Inflation fears could be stoked with continued Middle East tension and hurricane season heading our way. Inflation, real or perceived, generally does not bode well for mortgage bonds and could cause rates to rise.

Market Comment


Mortgage bond prices had another volatile week with rates pushing higher the beginning of the week only to bounce back towards the end. Thursday’s employment report was mixed. Non-farm payrolls fell 467,000 in June and the unemployment rate stood at 9.5%. Estimates were for jobs to decline 365,000 and the unemployment rate to stand at 9.6%. Fortunately the payrolls figure gained most of the attention along with falling oil prices and we recovered about 1/2 of a discount point Thursday morning. Oil was under $67/barrel Thursday morning, which helped alleviate inflation fears. The bond market was closed Friday for the holiday.

For the week interest rates were near unchanged.

Weather
The mortgage interest rate markets are subject to many factors. Most analysts agree that weather can have an effect on market activity. Although the effects are seldom long lasting, they can be quite significant.

The United States is the world’s largest exporter of corn. Last year, relatively rainy weather across the Midwest portions of the United States delayed the planting of corn. This caused corn prices to escalate. This year, corn farmers planted more acres of corn than analysts expected. Larger corn crops recently caused prices to fall. This is one bright spot amid heightened inflationary fears. Lower corn prices likely will result in lower food prices for some items.

The weather also has the potential to directly alter fuel prices. As we enter the hurricane season, many oil and gas fields in the Gulf, along with refineries along coasts, are susceptible to damage. If this were to occur, oil prices would rise sharply. Rising oil prices would do little to help mortgage bond prices, already pressured by inflationary fears and competition for investor funds from record debt levels. The result would most likely be higher rates.

The economic effects of weather may cause only temporary changes in economic activity. However, these changes can have a lasting impact on people obtaining mortgages. Despite recent rate fluctuation, mortgage interest rates remain historically favorable. Now is a great time to take advantage of rates at these levels.