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Events
This Week:
Retail
Sales Rose
Trade
Deficit Lower
Jobless
Claims Fell
Sentiment
Down
Events
Next Week:
Mon
3/15
Ind. Production
Tues
3/16
Fed Meeting
Housing Starts
Wed
3/17
PPI
Thur
3/18
CPI
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Quiet
Week for Mortgage Markets
During a
very light week for economic news, the economic data and Treasury auctions
contained few surprises and produced little reaction in mortgage markets.
Mortgage rates ended the week nearly unchanged.
In early
2009, the Fed embarked on a $1.25 trillion mortgage-backed securities (MBS)
purchase program to help keep mortgage rates low and stimulate the economy.
The amount purchased varied from week to week, reaching a peak of $33.2
billion in the week of March 25, 2009. The Fed has been gradually reducing
the size of its purchases at a pace consistent with a March 31 conclusion
of the program, and the most recent weekly purchases have been down to
around $10 billion.
As the
date nears, the big question is what will happen when the MBS purchase
program ends. This program is unprecedented, making the outcome difficult
to predict, and forecasts vary widely. Estimates for the impact on mortgage
rates from the conclusion of the program vary from an increase of one
percent to no change. Those who predict higher mortgage rates point to a
basic change in the fundamental supply and demand. The added demand from
the Fed was widely credited with moving rates lower, and a decrease in
demand would typically push rates higher. However, other economists argue
that investors respond only to unexpected news. In this view, since the Fed
has telegraphed the end of the program for months, there should be little
reaction around March 31. The Fed itself has indicated that they expect a
modest increase in mortgage rates due to the end of the program.
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Also Notable:
- Despite major snowstorms in many regions,
February Retail Sales increased
- The Labor Dept. announced that the number of job
openings in January rose 8%
- Oil prices rose above $80 per barrel to the
highest level since early January
- The Fed purchased $10 billion in agency MBS, with
about $24 billion more to go
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Average
30 yr fixed rate:
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Last
week:
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0.00%
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This
week:
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+0.01%
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Stocks
(weekly):
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Dow:
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10,600
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+100
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NASDAQ:
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2,350
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+50
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Week
Ahead
The big
story next week will be Tuesday's Fed meeting. No change in the fed funds
rate is expected, but any surprises in the Fed's statement could produce a
large reaction. The most significant economic data next week will be the
monthly inflation reports. The Producer Price Index (PPI) focuses on the
increase in prices of "intermediate" goods used by companies to
produce finished products and will come out on Wednesday. The Consumer Price
Index (CPI), the most closely watched monthly inflation report, will come
out on Thursday. CPI looks at the price change for those finished goods
which are sold to consumers. In addition, Industrial Production, an
important indicator of economic activity, will be released on Monday.
Housing Starts are scheduled for Tuesday. Import Prices, Leading
Indicators, and Philly Fed will round out a busy week.
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