Sunday, September 19, 2010

This Weeks Market UpDate

This week brings us the release of five relevant economic reports in addition to another FOMC meeting. Only one of the factual reports is considered to be of high importance. In fact, most of the economic news is considered to be low or moderately important. This should help limit the possibility of significant changes to mortgage rates most days this week.

August's Housing Starts will kick-off the week's data early Tuesday morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand by tracking construction starts of new homes, but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show a slight increase in new home starts between July and August. I believe we need to see a significant surprise in this data for it to have an impact on mortgage rates.

The FOMC meeting is Tuesday and is a one-day meeting. Mr. Bernanke and friends will adjourn at 2:15 PM ET. There is little possibility of seeing any type of change to key short-term interest rates. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find when the Fed's next move may come. The wild card is how the markets react to the statement because the lack of a change to key short-term interest rates shouldn't affect afternoon trading. If we see significant weakness in stocks, the bond market may benefit as a safe-haven from the volatility. This could lead to lower mortgage rates Tuesday afternoon and Wednesday morning.
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