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Events
This Week:
Industrial
Prod. Up
Inflation
Low
Housing
Starts Rose
Manufacturing
Mixed
Events
Next Week:
Tues
8/24
Existing Sales
2-yr Auction
Wed
8/25
Durable Orders
New Home Sales
5-yr Auction
Thur
8/26
7-yr Auction
Fri
8/27
GDP
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Rates
Remain Low
The
economic environment for mortgage rates was little changed this week.
Weaker than expected economic data and continued low inflation supported
low rates, and investor demand for bonds remained high. As a result,
mortgage rates again ended the week a little lower.
As the
economic recovery has lost steam recently, investors are closely watching
for signs that growth will slow even more. The economic data released
during the week was generally weaker than expected. In a sign that the
labor market is not improving, Weekly Jobless Claims rose to 500K, the
highest level since November 2009. After a series of positive readings, the
Philly Fed manufacturing index surprisingly fell to -7.7. Readings below
zero indicate a contraction in the sector. Slower economic growth typically
leads to less inflationary pressure, which is positive for mortgage rates.
On
Tuesday, a conference was held to discuss the future of Fannie Mae and
Freddie Mac, and participants offered a wide range of ideas. While no clear
consensus was reached, a few hints emerged about what to expect. Treasury
Secretary Geithner suggested that the government should retain a role in
providing guarantees for mortgages, but that taxpayers should be exposed to
less risk. The Obama administration has announced that it will produce a
proposal to address these issues by January 2011. In almost any scenario,
changes will be phased in very slowly over a period of many years to avoid
disruptions to the housing market.
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Also Notable:
- Core PPI inflation was a tame 1.5% higher than
one year ago
- July Housing Starts increased 2% from June, while
Building Permits fell 3%
- The Treasury will auction $102 billion in 2-yr,
5-yr, and 7-yr securities next week
- The Fed's Bullard expressed support for
additional Fed purchases of Treasuries if inflation slows
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Average
30 yr fixed rate:
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Last
week:
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-0.03%
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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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10,200
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-100
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NASDAQ:
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2,150
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-25
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Week
Ahead
Next
week's economic data will begin with housing market reports. Existing Home
Sales will be released on Tuesday. New Home Sales will come out on
Wednesday. Durable Orders, an important indicator of economic growth, will
also be released on Wednesday. Revisions to second quarter Gross Domestic
Product (GDP) will come out on Friday, along with Consumer Sentiment. There
will be Treasury auctions on Tuesday, Wednesday, and Thursday.
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