Market Comment - Week of April 26th, 2010

Mortgage bond prices fell last week pushing mortgage interest rates higher. The first portion of the week had very little data. Leading economic indictors came in stronger than expected which really didn't help us. Strong stocks pressured mortgage bonds a bit. Producer prices rose more than expected but the core rate was tame. New home sales shocked the market with a 26.9% increase. This was the largest increase in 47 years and not bond friendly. Rates rose by about 3/8 of a discount point for the week.

The Fed meeting Wednesday will be the most important event this week. The Treasury auctions will also likely overshadow a lot of the other releases as traders digest record debt that continues to hit the market. Friday morning may be volatile as the employment cost index and gross domestic product data are very important releases.


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Economic Factors

Economic Indicator
Release Date Time
Consensus Estimate
Analysis

Consumer Confidence
Tuesday, April 27, 2010
54.0
Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.

2-year Treasury Note Auction
Tuesday, April 27, 2010
None
Important. $44 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.

5-year Treasury Note Auction
Wednesday, April 28, 2010
None
Important. $42 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.

Fed Meeting Adjourns
Wednesday, April 28, 2010
No change
Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting.

Weekly Jobless Claims
Thursday, April 29, 2010
455k
Moderately important. An indication of employment. A larger figure may lead to lower rates.

7-year Treasury Note Auction
Thursday, April 29, 2010
None
Important. $32 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.

Q1 Advance GDP
Friday, April 30, 2010
3.5%
Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.

Q1 Employment Cost Index
Friday, April 30, 2010
Up 0.4%
Very important. A measure of wage inflation. Weakness may lead to lower rates.




Consumer Confidence

The Conference Board releases the Consumer Confidence Index on the last Tuesday of every month. The report details the levels of confidence individual households have in the performance of the economy. The data is derived from a survey of 5,000 households nationwide. The survey polls consumer opinions on current business conditions, their jobs, their incomes, and their future spending plans.

The consumer confidence index is significant in that it provides a precursor into consumers' willingness to spend in the months ahead. However, many analysts point out that willingness to spend does not always convert to actual expenditures.

This week's release will be eagerly anticipated. Look for any variation from estimates to cause mortgage interest rate volatility. Signs of eroding consumer confidence could lead to improvements in mortgage interest rates. However, stronger than expected figures could spike rates higher.