Mortgage Market Commentary

Mortgage Market Commentary

Strong demand for last week's Treasury auctions was a major reason why mortgage rates gained 19bps despite the rising stock market. Investors will be keeping an eye on the level of foreign interest in buying U.S. debt. If demand for U.S. Treasuries falls, then interest rates on mortgages will likely move higher. Today the Treasury International Capital data will offer the latest on foreign demand for U.S. securities, especially the Chinese, the largest holder of U.S. debt, including MBS. The big economic news this week will be the Fed Open Market Committee (FOMC) meeting on Wednesday. Cutting rates is no longer an option, but the Fed may announce additional measures to stimulate the economy. The most significant economic data this week will be the monthly inflation reports; Producer Price Index (PPI) on Tuesday and Consumer Price Index (CPI) on Wednesday. Higher inflation leads to higher mortgage rates. Other reports this week include, Industrial Production on Monday, Housing Starts on Tuesday, Mortgage Bankers Association (MBA) weekly applications on Wednesday and Jobless Claims, Leading Indicators & Philadelphia Fed index on Thursday. Also on Thursday the Treasury announces the amount of 2yr & 5yr notes to be auctioned. Fed Chief Bernanke speaks on Friday, rounding out the week.