Mortgage bond prices ended the week higher pushing mortgage interest rates lower. We had a week of very mixed data. Industrial production data was weaker than expected which was generally bond friendly to start the week. Stronger than expected housing starts
data Tuesday was not what the bond market was looking for but the reaction was muted. Significant stock weakness Wednesday helped mortgage bonds finish the day in positive territory. This was followed by lower than expected weekly jobless claims Thursday.
Fortunately mortgage bonds were positive overall for the week. Rates finished the week generally about 1/4 of a discount point lower.
The Treasury auctions will be carefully watched this week. If foreign demand remains solid rates should hold steady.
Release Date Time
Existing Home Sales
Monday, Oct. 25, 2010
Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
Tuesday, Oct. 26, 2010
Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
2-year Treasury Note Auction
Important. $35 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Durable Goods Orders
Wednesday, Oct. 27, 2010
Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
New Home Sales
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
5-year Treasury Note Auction
Q3 Advanced GDP
Thursday, Oct. 28, 2010
Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Q3 Employment Cost Index
Friday, Oct. 29, 2010
Very important. A measure of wage inflation. Weakness may lead to lower rates.
Employment Cost Index
The employment cost index is a quarterly report issued by the Department of Labor. The report measures the growth of wages, salaries, and benefits costs over a certain period of time. Though ECI figures are usually weeks old, the data remains the best indicator
of employment price pressures considering it factors employees' total compensation.
If wage pressures become evident, higher expectations of inflation also tend to arise. However, increasing compensation does not necessarily lead to increased inflationary pressures. Oftentimes, increased productivity enables employers to increase compensation
without increasing the costs of their goods or services. Be cautious heading into this release.