The Colley Team Blog

Market Comment - Week of March 22nd, 2010

Mortgage bond prices rose last week helping mortgage interest rates improve slightly. We started the week on a positive note with rates falling amid tame inflation readings. The producer price index fell 0.6% and the core rose 0.1%. The headline figure was the lowest since July 2009. Weekly jobless claims showed the employment situation remained poor. Unfortunately we saw the market fall a bit pushing rates higher Thursday afternoon following the announcement of the size of the upcoming Treasury auctions and amid fear of future rate hikes. Rates fell about 1/8 of a discount point for the week.

The durable goods and gross domestic product data will be the most important releases this week. Supply concerns will continue to weigh heavily upon the bond market with the continued record Treasury auctions. If foreign demand falters mortgage interest rates could be pressured higher.


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Economic Factors

Economic Indicator
Release Date Time
Consensus Estimate
Analysis

Existing Home Sales
Tuesday, March 23, 2010
Down 0.9%
Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates.

2-year Treasury Note Auction
Tuesday, March 23, 2010
None
Important. $44 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.

Durable Goods Orders
Wednesday, March 24, 2010
Up 0.5%
Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.

New Home Sales
Wednesday, March 24, 2010
Up 1.5%
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.

5-year Treasury Note Auction
Wednesday, March 24, 2010
None
Important. $42 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.

7-year Treasury Note Auction
Thursday, March 25, 2010
None
Important. $32 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.

Q4 GDP third estimate
Friday, March 26, 2010
Up 5.8%
Important. The aggregate measure of US economic production. Weakness may lead to lower rates.

U of Michigan Consumer Sentiment
Friday, March 26, 2010
71
Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.




Gross Domestic Product

The Gross Domestic Product (GDP) is one the most important reports during any given quarter. GDP is a measure of US economic output and spending. The report is significant in that it provides investors, analysts, traders, and economists with a comprehensive report of the direction of the economy. In addition, it also influences the decisions of Federal Reserve policy makers, Congressional budget employees, and corporate financial planners.

GDP is the sum total of goods and services produced by the United States. The initial report is often based on incomplete data. Therefore, additional revisions are released over the following two months. There are often substantial differences between the initial release and the revisions. The mortgage-backed security market generally responds favorably to weaker GDP growth.

While revisions generally don't move the market like the original release, they still have the potential to cause market volatility if vastly different from the prior releases. Be cautious heading into the data this week.