The Weekly Mortgage Market Watch Update – Monday, July 6, 2009

The Week Ahead:

There are several Treasury auctions that are scheduled for this week. Most notably, the Treasury will sell 10-year TIPS (Treasury Inflation Protected Securities) is scheduled for Monday, the 10-year Notes on Wednesday, and the 30-year Bonds on Thursday. These sales can have an impact on trading in bonds and mortgage backed securities and possibly affect mortgage rates. If these auctions are met with a strong demand from investors, we could see improvements in prices of mortgage backed securities in the afternoon hours, and that could lead to improved pricing in mortgage rates. Conversely, if these auctions are met with weak demand, we may see prices of mortgage backed securities fall, and mortgage rates could go up.

The release of quarterly corporate earnings reports begins on Wednesday when Alcoa posts their 2nd quarter results. Traders are anxiously waiting for these earnings reports to see just how hard the weak economy is affecting corporate earnings and profits. Profits at most companies fell last quarter, and it is widely expected that the contraction will continue through at least the 3rd quarter of this year. These quarterly earnings reports can lead to significant volatility in the stock markets, which could influence bond trading and mortgage rates. If the corporate profits are as weak if not weaker than expected, this will indicate that the economy is still faltering, and stocks will decline and bonds and mortgage backed securities will become more attractive to investors. This will help prices of bonds and mortgage backed securities to go
up which in turn will help lower mortgage rates.

Economic Reports This Week:

There are only three monthly economic reports scheduled for release the latter part of this week. While the unemployment report may have some impact, none of the scheduled reports are expected to have a major impact on prices of bonds or mortgage backed securities this week. The markets will be impacted more by the Treasury auctions and corporate earnings reports this week.

Monday, July 6th:

• There are no economic reports scheduled for release today.

Tuesday, July 7th:

• There are no economic reports scheduled for release today.

Wednesday, July 8th:

• There are no economic reports scheduled for release today.

Thursday, July 9th

• Jobless Claims - New claims for unemployment are tabulated each week to show the number of individuals who filed for unemployment insurance for the first time. Analysts are predicting that 610,000 new claims of unemployment will have been filed last week. Continuing claims for unemployment fell last week to 6.702 million. This still indicates that it's taking more time for the jobless to find work, and some are either finding work or have exhausted their unemployment benefits. With the high rate of people unemployed, the threat of wage based inflation remains subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. This data is usually not considered to be of high importance to the bond or the mortgage backed securities markets. However, with so few economic reports scheduled for release this week coupled with last week's worse than expected job losses, it’s expected that the markets will be paying closer attention than usual to the unemployment claims report this week.
  
  
• Fed’s MBS Purchase Program – The results of this week’s purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $598 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Friday, July 10th:

• Goods and Services Trade Balance Report for May – This report measures the size of the U.S. trade deficit. Analysts are forecasting a $28.8 billion trade deficit for May. This data is not considered to be of high importance to the bond market and most likely have little or no impact on prices of mortgage backed securities or mortgage rates.
  
  
• University of Michigan's Index of Consumer Sentiment Preliminary Report - The preliminary reading for July is expected to rise slightly to 71.5 from June's final reading of 70.8. This would indicate that consumers are becoming a little more comfortable with their own financial situations. It is believed that if consumers are confident in their own finances, they are more apt to spend more in the near future. The pattern in consumer attitudes and spending often has some influence on stock and bond markets. Increasing consumer confidence usually leads to improved stock prices and lower bond prices which in turn leads to higher mortgage interest rates. However, this report is not expected to have much impact on the markets this week.

How do Economic Data Releases Affect Mortgage Interest Rates?

One of the easiest and most important things for you to know when deciding when to lock in the interest rate on your mortgage is knowing what economic data is going to be released - and when. Economic data releases are important because they provide a snapshot of what’s happening in the economy. They also provide a foreshadowing of any upcoming market volatility.

While an in depth review of an economic event can help you make an informed decision, understanding the nuances of a release can't help you if you don't know when it’s happening. It’s just as important to know when these data releases are happening as knowing what basic effect these releases can have on the market.

Recent Mortgage Interest Rate Activity:

The chart below shows the price trend of the MBS 30-Year 4.5% coupon over the past two weeks:

The graph below shows the price trend of the MBS 30-Year 4.5% coupon over the past 30 days (white line) as well as its 30 day moving average (green line):


Remember - as the price of MBS goes up, the yield goes down - and mortgage interest rates go down with it. Conversely, as the price goes down, the yield goes up - and so do mortgage interest rates.

Mortgage Interest Rate Outlook:

Moderate to High Volatility. Overall, I am expecting to see a fairly active week in mortgage rates. I suspect that stocks may continue their selling trend this week which will help prices of bonds increase and mortgage rates fall. However, if this week’s sales of Treasury notes and bonds are met with a lackluster demand, and if corporate earnings reports come in higher than expected, then mortgage rates will most likely rise and end the week higher than last week's closing levels.

For mortgage rate lock advice, see my Daily Mortgage Interest Rate Lock Advisory at http://dailyratelockadvisory.blogspot.com/. See today’s mortgage rates at www.LewCorcoran.com/RateSheet.

The Weekly Mortgage Market Watch Update – Monday, June 29, 2009

The Week Ahead:

This week marks the end of the 2nd quarter of the year, and that tends to lead to volatility in the markets and profit taking by traders. It could be “anything goes” on Monday and Tuesday. It will also be a holiday shortened week as the markets will be closed on Friday in observance of Independence Day weekend. This means the markets will be most active between Tuesday and Thursday this week.

Because the markets will not be closing early on Thursday, we can expect traders to be leaving early Thursday ahead of the long holiday weekend. This will lead to light trading volume in the afternoon before the markets close. And, the employment situation report is due out that same morning. Both the employment situation report and the light trading volume can lead to high volatility in the markets on Thursday.

Economic Reports This Week:

There are five economic reports scheduled for release this holiday shortened week, but four of them are considered only fairly important. And of those four reports, the employment situation report is considered the most important. There are no economic reports scheduled for release on Monday, and the markets are closed on Friday.

Monday, June 29th:

• There are no economic reports scheduled for release today.

Tuesday, June 30th:

• Consumer Confidence Index (CCI) for June – This report measures the willingness of the consumer to spend, and that’s important because consumer spending makes up two-thirds of the U.S. economy. Analysts are expecting a reading of 57.0, up from the 54.9 reading last month. If there is a sizable increase in the confidence reading from the previous month, bond prices may fall and mortgage rates may rise slightly.

Wednesday, July 1st:

• Institute of Supply Management (ISM) Manufacturing Index for June - This index measures manufacturer sentiment by surveying trade executives on current business conditions. Analysts are expecting a reading of 40.0. A reading below 50 means that the majority of the executives surveyed feel that business activity is contracting. A continued contraction in business would be good news for bonds (prices rise) and mortgage rates (rates fall).

Thursday, July 2nd:

• The Employment Situation Report for June – Released by the Labor Department, this report provides is with the number of new payrolls added and the average hourly earnings in June. These are considered to be very important readings of the employment sector, and can have a major impact on the financial markets. Analysts are expecting to see that 350,000 jobs were lost last month, and the unemployment rate rise 0.2% to 9.6%. Analysts are also expecting to see a 0.2% increase in hourly wages. A large decline in payrolls, rising unemployment, and no change in earnings would lead to higher bond prices and lower mortgage rates. However, stronger than expected readings could be extremely detrimental for mortgage pricing (lower bond prices and higher mortgage rates), especially as we head into light trading Thursday afternoon and ahead of the long holiday weekend.
  
  
• Factory Orders for May – Released by the Commerce Department, this report is similar to the Durable Goods Orders report that was released last week. The biggest difference is that this week's report covers both durable and non-durable goods. Analysts are expecting the report to show a 1.4% rise in new orders from April's levels. A smaller than expected rise in orders would be considered good news for the bond market and could help lower mortgage rates slightly Thursday. While it usually doesn't have as much of an impact on the bond market as the durable goods data does, it can still lead to changes in mortgage pricing if it varies greatly from forecasts.
  
  
• Jobless Claims - New claims for unemployment are tabulated each week to show the number of individuals who filed for unemployment insurance for the first time. Analysts are predicting that 619,000 new claims of unemployment will have been filed last week. Continuing claims for unemployment rose again to 6.738 million. This still indicates that it's taking more time for the jobless to find work, and some are either finding work or have exhausted their unemployment benefits. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
  
  
• Fed’s MBS Purchase Program – The results of this week’s purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $598 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Friday, July 3rd:

• The markets are closed in observance of Independence Day weekend.

How do Economic Data Releases Affect Mortgage Interest Rates?

One of the easiest and most important things for you to know when deciding when to lock in the interest rate on your mortgage is knowing what economic data is going to be released - and when. Economic data releases are important because they provide a snapshot of what’s happening in the economy. They also provide a foreshadowing of any upcoming market volatility.

While an in depth review of an economic event can help you make an informed decision, understanding the nuances of a release can't help you if you don't know when it’s happening. It’s just as important to know when these data releases are happening as knowing what basic effect these releases can have on the market.

Recent Mortgage Interest Rate Activity:

The chart below shows the price trend of the MBS 30-Year 5.0% coupon over the past two weeks:

The graph below shows the price trend of the MBS 30-Year 5.0% coupon over the past 30 days (white line) as well as its 30 day moving average (green line):

Remember - as the price of MBS goes up, the yield goes down - and mortgage interest rates go down with it. Conversely, as the price goes down, the yield goes up - and so do mortgage interest rates.

Mortgage Interest Rate Outlook:

Moderate to High Volatility. Overall, we can expect to see some volatility in the markets and in mortgage rates on Tuesday and Wednesday. However, we could see high volatility in the mortgage backed securities market and on mortgage rates on Thursday. The reasons are: 1) the report on the rate of unemployment will be released in the morning; and 2) trading in afternoon will probably be light as traders leave early for the long weekend. I recommend that you maintain contact with your mortgage professional this week if you’re still floating an interest rate and are getting close to settlement.

For mortgage rate lock advice, see my Daily Mortgage Interest Rate Lock Advisory at http://dailyratelockadvisory.blogspot.com/. See today’s mortgage rates at www.LewCorcoran.com/RateSheet.

The Weekly Mortgage Market Watch Update – Monday, June 22, 2009

The chart below shows the price trend of the FNMA 5.0% coupon (mortgage backed securities) over the past two weeks:

The Week Ahead:

The Feds will be auctioning $104 billion in new T-bills, notes and bonds every day week except Friday. Mortgage rates will most likely be impacted by the auctions on Wednesday and Thursdays. If they are met with a strong demand, bond prices could and mortgage rates fall during afternoon trading hours. But, if the auctions are met with lackluster demand, bond prices may fall and mortgage rates will rise in afternoon trading.

The Federal Open Market Committee (FOMC) begins tomorrow and will adjourn Wednesday afternoon. It is expected that Ben Bernanke will keep the key short-term interest rates at the current level. However, the post meeting statement, to be released at 2:15pm on Wednesday, could create volatility in the markets.

Economic Reports This Week:

There are six economic reports scheduled for release, another Federal Open Market Committee (FOMC) meeting, and another round of Treasury auctions this week - this week could be very volatile for mortgage rates.

Monday, June 15th:

• There are no economic reports scheduled for release today.

Tuesday, June 16th:

• Existing Home Sales Report for May – Released by the National Association of Realtors, this report helps us measure the strength in the housing market as well as mortgage credit demand. The report is expected to show an increase in existing home sales from April to May, but it is not expected to have much of an impact on the bond market or mortgage interest rates.

Wednesday, June 17th:

• New Home Sales Report for May - Similar to the Existing Home Sales report, this report provides us with the sales volume of newly constructed homes. Like the Existing Home Sale Report, this report is also expected to show a rise in sales, but it is not expected to have much of an impact on the bond market or mortgage interest rates.
  
  
• Durable Goods Orders Report for May – This report provides an indication of the strength in the manufacturing sector of the economy, and is expected to show a decline of 0.5% in new orders from April to May. Recently, orders for durable goods vary widely from month to month. However, a larger than expected decline will help drive bond prices up and which in turn will lead to lower mortgage interest rates.
  
  
• FOMC Meeting - The FOMC meeting will adjourn in the afternoon. It is expected that Ben Bernanke will keep the key short-term interest rates at the current level. However, the post meeting statement, to be released at 2:15pm on Wednesday, could create volatility in the markets.

Thursday, June 18th:

• Final Reading to the 1st Quarter GDP - The GDP data is quite aged now (covers January through March) and will likely have little impact on the bond market or mortgage pricing unless it varies greatly from previous readings. Last month's first revision showed a 5.7% decline in the GDP. This month's second and final revision is expected to the same decline.
  
  
• Jobless Claims - New claims for unemployment are tabulated each week to show the number of individuals who filed for unemployment insurance for the first time. Analysts are predicting that 613,000 new claims of unemployment will have been filed last week. Continuing claims for unemployment fell for the first time in 5 months to 6.687 million. This still indicates that it's taking more time for the jobless to find work, and some are either finding work or have exhausted their unemployment benefits. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
  
  
• Fed’s MBS Purchase Program – The results of this week’s purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $556 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Friday, June 19th:

• Personal Income and Outlays for Report May - This report provides an indication of the consumer’s ability to spend as well as their current spending activity. Analysts are expecting to see an increase of 0.4% in income and a 0.3% rise in the spending portion of the report. Smaller than expected increases should be good news for the bond market (higher prices) and provide us with lower mortgage rates .
  
  
• University of Michigan’s Index of Consumer Sentiment for May – The index is expected to provide a reading of 69.7, up from 69.0 the previous month. An upward revision in the index from the previous month would be considered a negative for bonds (lower prices and higher yields and mortgage rates).

How do Economic Data Releases Affect Mortgage Interest Rates?

One of the easiest and most important things for you to know when deciding when to lock in the interest rate on your mortgage is knowing what economic data is going to be released - and when. Economic data releases are important because they provide a snapshot of what’s happening in the economy. They also provide a foreshadowing of any upcoming market volatility.

While an in depth review of an economic event can help you make an informed decision, understanding the nuances of a release can't help you if you don't know when it’s happening. It’s just as important to know when these data releases are happening as knowing what basic effect these releases can have on the market.

Mortgage Interest Rate Outlook:

High Volatility. Overall, look for Monday being the quietest day, and Wednesday and Thursday to be the busiest days for bonds and mortgage rates as the PPI and CPI reports are released. There is a pretty good possibility of seeing mortgage rates change several times again this week, so please proceed cautiously if still floating an interest rate.

For mortgage rate lock advice, see my Daily Mortgage Interest Rate Lock Advisory at http://dailyratelockadvisory.blogspot.com/. See today’s mortgage rates at www.LewCorcoran.com/RateSheet.

The Weekly Mortgage Market Watch Update – Monday, June 15, 2009

The Week Ahead:

The are no government auctions of T-bills, notes and bonds this week. The Treasury will have more auctions for the 2 year, 5 year & 7 year notes on June 23 – 25. On economic news, there are more indications that this recession is not yet over and still months away from any recovery. This will help keep mortgage rates down this week.

On Wednesday, the Tim Geithner, Secretary of the Treasury, will announce plans to overhaul regulation and supervision of the financial sector.

Economic Reports This Week:

There are five economic reports scheduled for release this week. Two of the five reports – the Producer Price Index (PPI) and the Consumer Price Index (CPI) - are considered to be of high importance to the markets and mortgage rates. The remaining reports are of interest to the markets, but they are not likely to cause any changes in bond prices and mortgage rates unless they vary greatly from their forecasts.

Monday, June 15th:

• There are no economic reports scheduled for release today.

Tuesday, June 16th:

• Housing Starts for May – The housing starts reports provides information on the construction of new homes each month. Analysts are expecting the report to show 500,000 new housing starts for the month of May. This report is not expected to have much of an impact on mortgage rates.
  
  
• Producer Price Index (PPI) for May - The report is one of the most important reports of the week as it measures inflationary pressures at the producer or manufacturer level of the economy. The report consists of two readings: the overall index and the core data. The core data excludes the more volatile food and energy prices. Analysts are expecting to see 0.7% increase in the overall index, and a 0.1% increase in the core data. A larger increase could raise concerns about rising inflation as it may indicate that the economy is pulling out of the recession. Rising inflation – even fears of possible inflation - causes investors to sell bonds which in turn drives bond prices lower and mortgage rates higher.
  
  
• Industrial Production for May – This report measures the output at U.S. factories, mines and utilities, and provides an important measurement of manufacturing sector strength. Economists are expecting the report to show a decline of 1.0%. If the shows that production is rising, then concerns of manufacturing strength may come into play in the bond market and have a negative impact in mortgage rates (bond prices fall and mortgage rates will rise). On the other hand, a decline of more than 1.0% decline would indicate that the manufacturing sector is weaker than expected and should help drive bond prices up and mortgage rates lower.

Wednesday, June 17th:

• Consumer Price Index (CPI) for May – This report is similar to the Producer Price Index (PPI), but measures inflationary pressures at the consumer level of the economy. Analysts are expecting the report to show a 0.3% rise in the overall index, and a 0.1% increase in the core data. As with the PPI, a larger increase could raise concerns about rising inflation as it may indicate that the economy is pulling out of the recession. Rising inflation – even fears of possible inflation - causes investors to sell bonds which in turn drives bond prices lower and mortgage rates higher.

Thursday, June 18th:

• Leading Economic Indicators (LEI) for May - The Conference Board, a New York-based business research group, posts this data, and attempts to predict economic activity over the next three to six months. Analysts are expecting to see a 1.0% increase. If the report reveals rapidly rising levels of activity, bond prices will probably drop which will push mortgage rates higher. But, a weaker than expected reading may lead to lower mortgage rates.
  
  
• Jobless Claims - New claims for unemployment are tabulated each week to show the number of individuals who filed for unemployment insurance for the first time. Analysts are predicting that 610,000 new claims of unemployment will have been filed last week. Continuing claims for unemployment continue to rise and jumped again to another record to 6.816 million. This indicates that it's taking more time for the jobless to find work. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
  
  
• Fed’s MBS Purchase Program – The results of this week’s purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $556 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Friday, June 19th:

• There are no economic reports scheduled for release today.

How do Economic Data Releases Affect Mortgage Interest Rates?

One of the easiest and most important things for you to know when deciding when to lock in the interest rate on your mortgage is knowing what economic data is going to be released - and when. Economic data releases are important because they provide a snapshot of what’s happening in the economy. They also provide a foreshadowing of any upcoming market volatility.

While an in depth review of an economic event can help you make an informed decision, understanding the nuances of a release can't help you if you don't know when it’s happening. It’s just as important to know when these data releases are happening as knowing what basic effect these releases can have on the market.

Mortgage Interest Rate Outlook:

Moderate Volatility. Overall, look for Tuesday and Wednesday to be the busiest days for bonds and mortgage rates as the PPI and CPI reports are released. There is a pretty good possibility of seeing mortgage rates change several times this week, so please proceed cautiously if still floating an interest rate.

For mortgage rate lock advice, see my Daily Mortgage Interest Rate Lock Advisory at http://dailyratelockadvisory.blogspot.com/. See today’s mortgage rates at www.LewCorcoran.com/RateSheet.

The Weekly Mortgage Market Watch Update – Monday, May 25, 2009

The Week Ahead:

The Consumer Confidence Index being released on Tuesday and the Durable Goods Orders Report being released on Thursday are the two biggest reports of the week are and can heavily influence bond trading and mortgage rates. In addition, if GDP Revision Report, which is released ion Friday, varies greatly from forecasts, it could also lead to sizable changes in rates. In addition, there are a couple of Treasury auctions this week that are worth noting. If they are met with an exceptional demand or if there is lackluster interest from investors, both the 5-year sale on Wednesday and the 7-year auction on Thursday may influence bond trading and possibly mortgage rates.

Economic Reports This Week:

This holiday shortened week brings us the release of six important economic reports or news releases. Two of the six reports – the CCI and the Durable Goods Orders - are highly important to the bond market and mortgage pricing. The remaining reports are considered to be of moderate importance to the markets.

Monday, May 25th:

• The markets are closed in observance of Memorial Day.

Tuesday, May 26th:

• Consumer Confidence Index (CCI) - This report measures consumer willingness to spend. The report is expected to show a reading of 42.0 after a 39.2 reading in April. Consumer spending makes up two-thirds of the U.S. economy. If the index rises, it indicates that consumers feel better about their personal financial situations and are more apt to make large purchases. If consumer confidence falls, analysts think consumer spending may slow in the near future. That should boost bond prices and push mortgage rates lower.
  Wednesday, May 27th:
  
  
• Existing Home Sales – This report provides us with a measurement of the strength of the housing market. Released by the National Association of Realtors, the report tracks the resale of homes in the U.S. Current forecasts are calling for a small increase in sales between March and April. However, it is not considered to be of much importance to the bond market unless it varies greatly from forecasts.

Thursday, May 28th:

• Durable Goods Orders Report for April – This report gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. It is currently expected to show an increase in new orders of approximately 0.5%. If this report shows a stronger than expected reading, we should see mortgage rates rise because it indicates manufacturing growth. If it shows a smaller than expected rise, we could see mortgage rates improve.
  
  
• New Home Sales – This report gives us a measurement of the strength of the housing market and future mortgage credit demand. It is expected to show a small increase in sales. However, it is not considered to be of much importance to the bond market unless it varies greatly from forecasts.
  
  
• Jobless Claims - New claims for unemployment are tabulated each week to show the number of individuals who filed for unemployment insurance for the first time. Analysts are predicting that 635,000 new claims of unemployment will have been filed last week. Continuing claims for unemployment continue to rise and jumped again to another record to 6.662 million. This indicates that it's taking more time for the jobless to find work. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
  
  
• Fed’s MBS Purchase Program – The results of this week’s purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $480 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Friday, May 29th:

• Revision to the 1st Quarter Gross Domestic Product (GDP) – The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best indicator of economic growth. Last month's preliminary reading revealed a 6.1% decline in the annual rate of growth. Analysts expect an upward revision to this reading to show a 5.5% decline. If the upward revision is stronger than expected, we may see the bond market react negatively (prices fall) and mortgage rates move higher.
  
  
• University of Michigan’s Index of Consumer Sentiment for May – It is forecasted to show little change from this month's preliminary reading of 67.9. An upward revision would be considered a negative for bonds.

How do Economic Data Releases Affect Mortgage Interest Rates?

One of the easiest and most important things for you to know when deciding when to lock in the interest rate on your mortgage is knowing what economic data is going to be released - and when. Economic data releases are important because they provide a snapshot of what’s happening in the economy. They also provide a foreshadowing of any upcoming market volatility.

While an in depth review of an economic event can help you make an informed decision, understanding the nuances of a release can't help you if you don't know when it’s happening. It’s just as important to know when these data releases are happening as knowing what basic effect these releases can have on the market.

Mortgage Interest Rate Outlook:

Moderate Volatility. Overall, it will be a busy week for bonds and mortgage rates. There is a pretty good possibility of seeing mortgage rates change several times this week, so please proceed cautiously if still floating an interest rate.

Remember - as the price of MBS goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it.

For mortgage rate lock advice, see my Daily Mortgage Interest Rate Lock Advisory at http://dailyratelockadvisory.blogspot.com/. See today’s mortgage rates at www.LewCorcoran.com/RateSheet.

The Weekly Mortgage Market Watch Update – Monday, May 18, 2009

The Week Ahead:

The National Association of Home Builders (NAHB) will release its Housing Market Index today. The index is based on a survey of home builders which rates the general economy and housing market conditions. Economists are forecasting that builders are becoming a little more optimistic about the future of the housing industry. New Housing Starts for April will come out on Tuesday, and most likely will show that homebuilders are keeping new housing starts low as there is an oversupply of existing homes on the market due to recent foreclosures.

The FOMC minutes from the Fed meeting on April 29th will be released on Wednesday, when the Fed refrained from increasing its purchases of bonds and securities because the economy was showing signs of economic stability. These detailed minutes often reveal additional insights into the action of the Fed.

On Thursday, the Treasury will announce the size of its next auctions for the 2-, 5- and 7-Year notes which begin on May 26th. The Fed will be purchasing securities on May 20th & 21st as it seeks to lower borrowing costs and combat the steep recession.

Yields on the LIBOR (London Interbank Offering Rate) index indicate that the efforts of governments and central banks worldwide to thaw the credit markets are working. The 3 month LIBOR fell 4 basis points to 79 basis points today - a record low. The LIBOR index is an important benchmark and indicator of the health of the credit markets.

Economic Reports This Week:

In addition to the release of the minutes from the last Federal Open Market Committee Meeting (FOMC) meeting, there are only two economic reports scheduled for release this week. Neither of the economic reports can be considered of high importance to the markets and mortgage rates, so we may see a fairly calm week for mortgage rates.

Monday, May 18th:

• There are no economic reports scheduled for release today.

Tuesday, May 19th:

• Housing Starts for April - This report provides a measure of the strength in the housing market as well as mortgage credit demand by tracking permits for new homes and actual starts of new home construction. The report is expected to show 540,000 new housing starts - a small increase in new starts from March's reading of 510,000. But, because this report is not considered to be of high importance to the bond market, it likely will have little to no impact on bond prices and mortgage rates.

Wednesday, May 20th:

• There are no economic reports scheduled for release today.
  
  
• Minutes of the last FOMC Meeting - Market participants will be looking for how Fed members voted during the last meeting 3 weeks ago, and for any comments about concerns for inflation in the economy. The goal is to form a guess about when the Fed may make another move to help the economy. The minutes will be released at 2:00 PM ET, so if there is a market reaction to them it will be evident during afternoon trading.

Thursday, May 21st:

• Leading Economic Indicators (LEI) for April - This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show a fairly large increase of 0.7% from March's reading, meaning that economic activity is likely to gain momentum during the next few months. A decline would be good news for the bond market and mortgage rates, while a larger increase could cause mortgage rates to inch higher Thursday.
  
  
• Jobless Claims - New claims for unemployment are tabulated each week to show the number of individuals who filed for unemployment insurance for the first time. Analysts are predicting that 645,000 new claims of unemployment will have been filed last week. Continuing claims for unemployment continue to rise and jumped again to another record to 6.56 million. This indicates that it's taking more time for the jobless to find work. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
  
  
• Fed’s MBS Purchase Program – The results of this week’s purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $457 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Friday, May 22nd:

• There are no economic reports scheduled for release today.

How do Economic Data Releases Affect Mortgage Interest Rates?

One of the easiest and most important things for you to know when deciding when to lock in the interest rate on your mortgage is knowing what economic data is going to be released - and when. Economic data releases are important because they provide a snapshot of what’s happening in the economy. They also provide a foreshadowing of any upcoming market volatility.

While an in depth review of an economic event can help you make an informed decision, understanding the nuances of a release can't help you if you don't know when it’s happening. It’s just as important to know when these data releases are happening as knowing what basic effect these releases can have on the market.

Mortgage Interest Rate Outlook:

Light Volatility. Overall, I think it will be a fairly calm week for mortgage rates if the stock markets remain calm and the week's data doesn't reveal any major surprises. The FOMC minutes might lead to some volatility in the markets, but neither of the economic reports are of great concern.

The bond markets will close early Friday afternoon ahead of the Memorial Day Holiday on Monday. These early closes sometimes lead to additional volatility in the bond markets as trading activity thins out as many traders start the weekend early.

The graph below shows the price of the MBS 30-Year 4.0% coupon over the past 30 days (white line) as well as its 30 day moving average (green line) over the same time period:

Remember - as the price of MBS goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it.

For mortgage rate lock advice, see my Daily Mortgage Interest Rate Lock Advisory at http://dailyratelockadvisory.blogspot.com/. See today’s mortgage rates at www.LewCorcoran.com/RateSheet.

The Weekly Mortgage Market Watch Update – Monday, May 11, 2009

The Week Ahead:

Today is the monthly "rollover" day for mortgage backed securities. Rollover day is when the current mortgage coupon is switched from the May contract to the June contract.

Financial shares soared 23% last week, boosting the stock markets 5.9% - even with news that more than half-a-million jobs were lost in April. Whether the stock markets will continue advancing this week is anyone’s guess, but analysts’ forecasts for this week’s data are somewhat optimistic. Meanwhile, the markets will be looking for signs of how 10 of the 19 top banks that are in need of extra capital will raise the $75 billion as required by the Fed’s stress test.

Economic Reports This Week:

There are several important pieces of economic news scheduled for release this week, but three stand out above the others: the Retail Sales report on Wednesday, and the Consumer Price Index and the Industrial Production reports on Friday. So, it’s going to be a fairly active week in the bond markets. There is no relevant data due out today, so expect the stock markets to help drive bond trading and mortgage rates.

Monday, May 11th:

• There are no economic reports scheduled for release today.

Tuesday, May 12th:

• Goods and Services Trade Balance Report for April - This report provides us with the size of the U.S. trade deficit, and measures the difference between imports and exports of both tangible goods and services. It’s expected to show a trade deficit of $27.5 billion, and follows a $26.0 billion trade deficit in March. The decrease in the trade deficit is more a result of falling exports and plummeting oil prices than fewer imports. It’s not likely to have much of an impact on the bond market or mortgage pricing.

Wednesday, May 13th:

• Retail Sales Report for April - This is an extremely important report for the financial markets as it measures consumer spending. Because consumer spending makes up two-thirds of the U.S. economy, this data can have a pretty significant impact on the markets. Analysts are predicting the report will reveal a 0.1% increase in sales of durable and non-durable goods from March to April. When new vehicle sales are excluded, the retail sales report is expected to show a 0.3% increase. A weaker than expected level of sales should push bond prices higher and mortgage rates lower. However, a larger increase could fuel bond selling and lead to higher mortgage rates.

Thursday, May 14th:

• Producer Price Index (PPI) Report for April – The PPI helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. Both the overall index and the core data, which excludes food and energy prices, are also expected to rise 0.1%. A smaller than expected increase in the core data would be ideal for mortgage shoppers.
  
• Jobless Claims - New claims for unemployment are tabulated each week to show the number of individuals who filed for unemployment insurance for the first time. Analysts are predicting that 609,000 new claims of unemployment will have been filed last week. Continuing claims for unemployment continue to rise and jumped again to another record to 6.351 million. This indicates that it's taking more time for the jobless to find work. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
  
• Fed’s MBS Purchase Program – The results of this week’s purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $429 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Friday, May 15th:

• Consumer Price Index (CPI) Report for April - This is similar to Producer’s Price Index (PPI) report, but measures inflationary pressures at the more important consumer level of the economy. Current forecasts are calling for no change in the overall index, and a 0.1% increase in the core data reading. The core data is the more important of the two because it excludes the more volatile food and energy prices. Its results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing.
  
• Industrial Production Report for April – This measures manufacturing sector strength by tracking output at factories, mines and utilities. It’s expected to show a 0.6% decline in production, and follows a 1.5% decline in each of the previous two months. This indicates that the contraction in manufacturing activity may be slowing. A smaller decline in output would be bad news for the bond market and mortgage rates (lower prices and higher rates) because it would indicate that the manufacturing sector is stronger than expected.
  
• University of Michigan's Index of Consumer Sentiment – This is a preliminary report; this index measures consumer willingness to spend and usually has a moderate impact on the financial markets. It is expected to show a reading of 67.0, which would be higher than the 65.1 reading the previous month. If the report shows an increase in consumer confidence, bond prices will likely fall (mortgage rates rise).

How do Economic Data Releases Affect Mortgage Interest Rates?

One of the easiest and most important things for you to know when deciding when to lock in the interest rate on your mortgage is knowing what economic data is going to be released - and when. Economic data releases are important because they provide a snapshot of what’s happening in the economy. They also provide a foreshadowing of any upcoming market volatility.

While an in depth review of an economic event can help you make an informed decision, understanding the nuances of a release can't help you if you don't know when it’s happening. It’s just as important to know when these data releases are happening as knowing what basic effect these releases can have on the market.

Mortgage Interest Rate Outlook:

Moderate Volatility. Overall, it likely will be a pretty active week for mortgage rates. Besides the week's important economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Friday with three reports scheduled for release, including the CPI. But Wednesday is important due to the Retail Sales report. I am expecting to see several noticeable changes in rates this week, and would not be surprised to see multiple intra-day revisions as well. Accordingly, I would strongly recommend maintaining contact with your mortgage professional the next several days if you’re still floating an interest rate.

For mortgage rate lock advice, see my Daily Mortgage Interest Rate Lock Advisory at http://dailyratelockadvisory.blogspot.com/. See today’s mortgage rates at www.LewCorcoran.com/RateSheet.