Daily Mortgage Market Information

The mortgage market is simply treading water today as investors await Friday's August nonfarm payroll report.

  This morning's August consumer confidence report showed a modest improvement over the five-month low set last month and drew little more than a passing glance from market participants.   The modest rise in consumer's attitudes was really nothing to get excited about since it amounted to nothing more than a very small upswing from a very dismal month earlier level. 

Investors fretting over the pace of the economic recovery will be closely attuned to any tidbit of insight that may be available in the minutes of the Federal Open Market Committee's August 10^th meeting (scheduled for release at 2:00 p.m. today).  Though the document will be picked apart on word-by-word basis, investors are unlikely to find anything that will provide them with an improved perspective on the state of the economy or an indication of a meaningful shift in the Fed's current monetary policy strategy.   If my assessment proves accurate, this event will have little, if any discernable impact on the current trend trajectory of mortgage interest rates. 

Daily Mortgage Market Information

The Commerce Department reported this morning that income and spending grew slightly in July while inflation pressures at the consumer level were benign. 

Personal incomes grew by 0.2% last month while spending rose by 0.4%.  The Fed's preferred measure of consumer price inflation, the personal consumption expenditure index, a separate component of the income and spending report, rose 0.1% in July and was up a meager 1.4% on a year-over-year basis.  With personal savings continuing to hover near 6.0%, it is clear consumers are focusing on getting their finances in order rather than aggressively increasing their spending.   Rising personal savings suggests to many analysts the engine that drives more than 70% of our domestic economic activity is likely to perform below its potential for months yet to come. 

Against such an economic backdrop stocks will likely continue to slump as capital flows from riskier asset classes into the safest investment vehicles available.  The good news here is that for the time-being, dollar denominated assets like Treasury obligations and mortgage-backed securities are about the-only-game-in-town that perfectly fits the "safe haven" requirement for both domestic and global investors.  As long as this condition prevails it will tend to support the prospects for steady to perhaps fractionally lower mortgage interest rates. 

Rates are going higher

The mortgage market is being pounded by profit-taking this morning as investors react to news indicating overall economic growth in the second-quarter was not as weak as many had anticipated.  Comments from Fed Chairman Bernanke indicating the Fed is prepared to take additional action if need be to restart the nation’s economic engines simply added a little fuel to the fire. 

The current mindset among mortgage investors toward today’s revised second-quarter Gross Domestic Product appears to revolve around the idea that while the component numbers weren’t particularly good – they were at least better than most had expected.   Real GDP increased at an annualized rate of 1.6% in the second quarter – revised down from first estimates for growth of 2.4% -- but ahead of the consensus forecast calling for a headline GDP number of 1.4%.   The stir the revised second-quarter GDP numbers are creating in the mortgage market will probably fade pretty quickly as calmer, cooler heads point out that until labor market weakness shows signs of improving; overall economic growth will remain desperately anemic.  But that is a story for another day.

Looking ahead to next week every scheduled report – from Monday’s July Personal Income and Spending data through the late-week release of the Institute of Supply Management’s Manufacturing and Service Sector Index values will take a backseat to the August Nonfarm Payroll figures scheduled to hit the newswires Friday morning at 8:30 a.m. ET.   Mortgage investors have already priced in expectations for a headline nonfarm payroll decline of 100,000 – a number likely sufficient to nudge the nation’s unemployment rate up to 9.6%.  Numbers that match or fall below the consensus estimate for these two major components of the August jobs report will tend to support steady to perhaps fractionally higher mortgage interest rates. Should one or both components exceed the consensus estimate -- look for mortgage investors to respond by pressing note rates a bit lower.

www.McDougallMortgages.com

Daily Mortgage Market Information

 Mortgage investors largely shrugged off this morning's data from the Labor Department showing the number of American workers filing for first-time jobless benefits fell by 31,000 during the week ended August 21^st.  

This freshly updated story from the labor sector has done nothing to resolve the debate currently raging among market participants over whether mortgage interest rates have moved to unsupportable levels - or whether the steady drumbeat of poor economic data and the seemingly insatiable appetite for safe-haven debt from domestic and foreign long-term investors will be strong enough to push home financing rates to astonishing new lows.  The jobless claims data series of late has certainly proven mixed enough to support both sides of the argument.  Looking at the reams of other data pointing at a stumbling economy -- I personally see a number of reasons to believe the threat of notably higher mortgage interest rates is not imminent just yet.

Uncle Sam will round out this week's four-part borrowing spree with the sale of a $29 billion stack of 7-year notes this afternoon.  Tuesday's 2-year note offering and Wednesday's 5-year note offering were each sold at record low yields, and there is little reason to expect demand will not be solid at today's auction as well.  If my assessment proves accurate, this event is unlikely to create much, if any reaction in the mortgage market.