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Events
This Week:
Inflation
Low
Ind. Production
Rose
Housing
Starts Down
Manufacturing
Mixed
Events
Next Week:
Tues
3/23
Existing Sales
2-yr Auction
Wed
3/24
New Home Sales
Durable Orders
5-yr Auction
Thur
3/25
7-yr Auction
Fri
3/26
GDP
Sentiment
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No
Surprises From Fed Meeting
There
were no major surprises in the economic data or the Fed announcement this
week. As a result, while volatility remained day to day, mortgage rates
ended nearly unchanged for the third straight week.
As
expected at its meeting on Tuesday, the Fed held the fed funds rate steady,
and the accompanying statement contained few changes. The statement
retained the language about the fed funds rate remaining at extremely low
levels for at least several months. The Fed's assessment of the economy was
a little more upbeat at this meeting, but pointed out that economic
improvement will occur slowly. The Fed continued to signal that the $1.25
trillion MBS purchase program will conclude at the end of March. With less
than two weeks of Fed MBS purchases remaining, investors will be watching
closely to see if the Fed's exit has an impact on mortgage rates.
This
week's inflation data showed that inflation is not a concern right now. The
February Core Consumer Price Index (CPI) increased at a low 1.3% annual
rate. The Fed's target range is commonly believed to be a 1.5% to 2.0%
annual rate. The current low inflation environment makes it easier for the
Fed to continue to hold the fed funds rate low to stimulate the economy.
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Also Notable:
- February Housing Starts fell 6% and Building
Permits declined 2%
- The Dow stock index rose to a new high for the
year
- The Treasury will auction $128 billion in 2-yr,
5-yr, and 7-yr securities next week
- The Fed purchased $10 billion in agency MBS, with
about $14 billion more to go
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Average
30 yr fixed rate:
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Last
week:
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+0.01%
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This
week:
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-0.02%
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Stocks
(weekly):
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Dow:
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10,750
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+150
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NASDAQ:
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2,375
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+25
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Week
Ahead
Next
week, Existing Home Sales will be released on Tuesday, and New Home Sales will
come out on Wednesday. Durable Orders, an important indicator of economic
activity, is also scheduled for Wednesday. A revised report on first
quarter Gross Domestic Product (GDP), the broadest measure of economic
activity, will come out on Friday, along with Consumer Sentiment. There
will be Treasury auctions on Tuesday, Wednesday, and Thursday. Several Fed
officials will be speaking during the week as well.
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