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Events
This Week:
Inflation
Low
Housing
Starts Up
Jobless
Claims Rose
Manufacturing
Mixed
Events
Next Week:
Mon
5/24
Existing Sales
Tues
5/25
2-yr Auction
Wed
5/26
Durable Orders
New Home Sales
5-yr Auction
Thur 5/27
GDP
7-yr Auction
Fri
5/28
Chicago PMI
Personal Income
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Investors
Shift to Safer Assets
This
week, uncertainty about the pace of the economic recovery caused investors to
shift to relatively safer assets, including government insured
mortgage-backed securities (MBS). Also positive for mortgage markets, the
economic data released this week showed that inflation remains extremely
low. As a result, mortgage rates declined during the week, reaching the
lowest levels of the year.
Concern
about the level of global economic growth drove financial markets this
week. Troubled European countries will be forced to reduce government
spending, and Chinese officials indicated that they will tighten monetary
policy to reduce inflation. In the US, it's not clear to what degree the
new financial regulation bill will cause banks to reduce lending, leading
to slower economic growth. In response to periods of uncertainty such as
this, investors seek to reduce risk by moving to safer assets such as
bonds, and greater demand for MBS pushes mortgage rates lower.
This
week's news from the housing sector was mixed. April Housing Starts
increased above the consensus forecast to the highest level since October
2008. Building Permits, a leading indicator, declined moderately. The May
NAHB Homebuilder confidence index rose to the highest level since August
2007. Even with the end of the homebuyer tax credit, the builders surveyed
remained optimistic about the next six months.
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Also Notable:
- April Core CPI inflation fell to the lowest level
in 44 years
- Weekly Jobless Claims unexpectedly jumped well
above the consensus forecast
- The Treasury will auction $113 billion in 2-yr,
5-yr, and 7-yrs next week
- Oil prices fell as low as $65 per barrel,
reaching the lowest level since July 2009
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Average
30 yr fixed rate:
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Last
week:
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-0.05%
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This week:
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-0.20%
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Stocks
(weekly):
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Dow:
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10,100
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-500
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NASDAQ:
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2,225
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-125
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Week
Ahead
Next
week, a wide mix of economic data will shed some light on the level of
economic growth. Existing Home Sales will be released on Monday, and New
Home Sales will come out on Wednesday. Durable Orders, an important
indicator of economic activity, will also be released on Wednesday.
Thursday, a revised figure for first quarter Gross Domestic Product (GDP)
will come out. The Chicago PMI manufacturing index and Personal Income are
scheduled for Friday. Consumer Sentiment and Consumer Confidence will round
out the Economic Calendar. In addition, there will be Treasury auctions on
Tuesday, Wednesday, and Thursday.
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