Bond Market Review and Forecast – for Week Ending 01/01
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Last week was pretty ugly for mortgage rates with positive economic data, and not so strong demand for all of the government’s treasury auctions.
Case-Shiller HPI for October declined 7.3% for the 20 city index, slightly better than estimates. Overall the number was described as flat with only 7 of the 20 cities showing a month-to-month increase. This is about 9 months of improving numbers, the fear is that this may begin a second decrease in the index; with the current consistent Fed policy this is not something to worry about.
Consumer Confidence for December, came in at 52.9, just slightly below the expectations of 53. The economy is considered to be on solid ground with a reading of 90, not contracting or expanding, 100 would indicate economic growth.
Chicago PMI (Purchasing Managers Index) for December, came in at 60, considerably higher than the estimate of 55, and November’s 56.1. Reinforcing the fact that we are starting to see some growth.
Jobless Claims for the week of 12/26 fell to 432,000 much better than the estimate of 460,000, which would have been an increase. This is the lowest weekly number since July 2008. The increasing employment points to an improving economy, and inflation.
Monday we have the ISM Index (Institute for Supply Management), estimates call for 54.0, which would be an increase from November of 53.6. The slight increase called for in the forecast are probably not enough to move the market. The higher the number the worse for mortgage rates, as it shows the manufacturing sector strengthening.
Construction Spending for November, estimates call for a -0.5%, worse the flat reading in October. No real weight will be put into this number until we see some strong growth, even then the number is not considered to have much impact on the market.
Tuesday kicks off with Factory Orders expected to increase by 0.5%, less than Octobers 0.6%. Not much to see here unless we see a large revision to durable goods portion.
Wednesday we will have the release of the minutes from the last FOMC meeting. This will give us a glimpse into the Fed’s thoughts on inflations and monetary policy.
Thursday will bring the initial Jobless claim, estimates call from 445,000. A fear is that the Holiday’s and weather may have skewed the numbers, meaning the number should have been worse than reported. The market has been extremely focused on this number as of late. If the number is lower it will put some pressure on Treasuries, but the traders could wait for Friday’s full report for December.
Friday will bring the release of December’s Unemployment Rate, forecasts call from a rise to 10.1%. If we see a worse number this will move the market, and cause better mortgage rates.
If we get as analysts expect to a net job gain of zero, we would have a strong psychological effect causing the stock market to risk and mortgage market to get worse.
Keep in mind positive economic data generally causes money to flow from Bonds and into Stocks, causing Bonds and home loan rates to worsen, and negative economic data will have the opposite result.
With the economy starting to show signs of expanding, don’t expect mortgage rates to stay low for long. For your personalize rate quote just complete the box to the right.
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