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Market
Comment
Mortgage bond prices were only slightly higher last week,
which kept mortgage interest rates in check.
There were rate improvements throughout the middle of the
week tied to weaker than expected ADP employment figures.
Unfortunately, a lot of those gains were erased Friday
morning with the release of the employment report.
Unemployment came in @ 8.3% which was better than the
expected 8.5% mark. Payrolls
increased 243k, which was considerably stronger than the expected
155k increase. Stocks
rallied and MBS prices fell as a result.
Mortgage bonds ended the week unchanged to better by 1/8 of a
discount point despite the strong negative movement Friday.
LOOKING
AHEAD
|
Economic
Indicator |
Release
Date &
Time |
Consensus
Estimate |
Analysis
|
| 3-year Treasury Note
Auction |
Tuesday,
Feb. 7,
1:15 pm, et
|
None
|
Important.
Notes will be auctioned.
Strong demand may lead to lower mortgage rates.
|
| Consumer Credit |
Tuesday,
Feb. 7,
3:00 pm, et
|
$9.56b
|
Low importance.
A significantly large increase may lead to lower
mortgage interest rates.
|
| 10-year Treasury Note
Auction |
Wednesday,
Feb. 8,
1:15 pm, et
|
None
|
Important.
Notes will be auctioned.
Strong demand may lead to lower mortgage rates.
|
| Weekly Jobless Claims |
Thursday,
Feb. 9,
8:30 am, et
|
375k
|
Important.
An indication of employment.
Higher claims may result in lower rates.
|
| 30-year Treasury Bond
Auction |
Thursday,
Feb 9,
1:15 pm, et
|
None
|
Important.
Bonds will be auctioned.
Strong demand may lead to lower mortgage rates.
|
| Trade Data |
Friday,
Feb. 10,
8:30 am, et
|
$45b deficit
|
Important.
Affects the value of the dollar.
A falling deficit may strengthen the dollar and lead to
lower rates.
|
| U of Michigan Consumer
Sentiment |
Friday,
Feb. 10,
10:00 am, et
|
60.5
|
Important.
An indication of consumers’ willingness to spend.
Weakness may lead to lower mortgage rates.
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Auctions
US Treasury bonds do not directly dictate fixed mortgage
interest rate pricing however they do have an indirect impact.
Treasuries are used as a hedge for the interest rate risk
associated with mortgage-backed security investing.
Mortgage-backed securities have the potential for prepayment
that Treasuries do not. Both Treasuries and mortgage bonds often track in the same
direction but this is not always the case.
There are many times that Treasuries and mortgage bonds move
inversely.
Despite the overwhelming size of the US economy, foreign
investors can still have an effect on moving the financial markets.
When foreign economies struggle foreign investors often
purchase US based investments including mortgage bonds.
This demand usually causes mortgage bond prices to rise and
interest rates to fall. This
flight to quality buying is one of the factors helping mortgage
interest rates remain historically low.
The Fed recently noted that continued global economic turmoil
will be a factor in the health of the US economy.
How that all plays out is still uncertain.
The Treasury auctions this week will be important in
determining the current appetite of foreign investors for dollar denominated debt securities.
Demand has been generally good as of late but auctions of
different durations often vary in their results.
Mortgage bond prices could fall pressuring mortgage interest
rates higher if the auctions this week are poorly bid.
The inverse is also true.
Be alert heading into the auctions.
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Copyright
2012. All Rights Reserved. Mortgage Market
Information Services, Inc. www.ratelink.com
The information contained herein is
believed to be accurate, however no representation or warranties are
written or implied.
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