Bonds saw another week of turmoil and ended lower, thus mortgage rates ticked a little higher. While they did get a rally after the release of the Fed decision and their policy statement, that rally was short lived as data showed it was not justified.
The reason for the rally was really just due to stocks being extremely disappointed with only a .25% rate cut. The result was a major sell off in the stock market and since the money has to flow somewhere, it went into bonds. Then the PPI, Retail Sales, and CPI numbers came in and bonds dropped below their 25-day MA and are still testing their 50-day MA as well as the upward trend line.
The "good news" is they are still above their 50-day MA and have not truly broken the trend line yet, combined with a movement toward an oversold position according to stochastics. Just keep in mind, technical indicators do not mean anything when the "news" isn’t friendly.
Speaking of news, here is what is due out this week:
- Monday: Empire State Index (8:30)
- Tuesday: Housing Starts (8:30)
- Wednesday: Crude Inventories (8:30)
- Thursday: GDP (8:30), Chain Deflator (8:30), Philadelphia Fed Index (12:00)
- Friday: Personal Income (8:30), Personal Spending (8:30), PCE and Core PCE (8:30), Consumer Sentiment Index (10:00)
Remember that the boldface reports are typical market movers, while the other ones can move the markets depending on the report. This week’s "main event" will clearly be the release of the Fed’s favorite gauge on inflation, the PCE reports.
Look for a fairly stable bond market at the beginning of the week, though any news may trigger bond movement as the market has proved "moody" recently. As we approach the end of the week, particularly Thursday and Friday, expect volatility with the direction of bonds to be set by the end of the week. The big question will be can bonds muster strength or not.
My own forecast is for bonds to break the trend, that PCE will be disappointing as it shows inflation returning somewhat, and so I will be locking clients unless somewhat proves I should be doing otherwise.
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{ 2 comments… read them below or add one }
What is your expected forecast concerning the end of this mortgage drought? I operate 2 mortgage websites: nbgmortgagefinders.com and freemortgagequotesnbg.com. I’ve noticed that not only have the number of mortgage loan inquiries significantly declined, but the quality of the inquiries have as well. Approximately 70% of my prospects have severe credit issues, compliments of substandard sub prime mortgage lender practices for the most part. I started referring them to badcreditrepairservicesnbg.com, which is a web site I created to market my “do it yourself” credit repair manual. Hopefully, as my prospects complete their credit repair processes, they will return to me for their mortgage services.
Bobby,
As far as mortgage “drought”, it is highly unlikely we will see the levels of 2003 again. That being said, the outlook for 2008, in my opinion is not bad, in fact there are factors that should see increased demand for some in the business. Those who adapt to the changes and take this time to demonstrate expertise will be better off. I still see many that will bail out of the business as well.
As you have seen, credit repair is a big thing these days as it is needed. The mortgage professional that incorporates this as an “added value” service will be better off as well.
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