Last Week in Review |
They say no news is good news. But perhaps the more important question this week is will the Fed's news from their latest Federal Open Market Committee Meeting be good news for rates and the economy? Here's what you need to know. Last week, the Fed released their Interest Rate and Policy Statement after their latest regularly-scheduled meeting of the Federal Open Market Committee. While there was speculation ahead of time that the Fed may decide to buy more longer-term Treasuries, which could jumpstart the cycle needed to eventually bring home loan rates down, the Fed did not make any changes to the Fed Funds Rate or their Bond purchase program. The one change from the prior meeting's statement was that the Fed now does not see deflation as a risk. While this is good news, it also means that there could be a real threat of inflation down the road. And remember, inflation is bad for Bonds and home loan rates, so this could have a big impact on rates in the longer term! There was good news in the Personal Income Report as personal income rose in June by its biggest gain in over a year. The increase in income led to higher consumer spending and savings in June. Spending rose for the first time in three months, while the savings rate climbed to its highest level since December 1993 as the chart below shows. -----------------------
Keep in mind that a high savings rate is a double-edged sword ... it's good to see people saving, but spending is the lifeblood of a strong economy. The Durable Goods Report also brought good news, as did Consumer Sentiment, which was better than expected. Durable Orders came in better than expected for May, led by orders for airplanes and machinery. Although one report doesn't make a trend, the reading is encouraging and may signal that the economic slump is starting to ease. But there was still disappointing news on the housing and job market fronts. Both New and Existing Home Sales came in below expectations and Initial Jobless Claims came in a bit worse than expected, indicating that the job market continues to be weak and slow in stabilizing. After all the news of the week, Bonds and rates managed to break above important technical levels to end the week .25 percent better than where they began with a little help from some solid Treasury auction results. FORGETTING SOMEONE'S NAME IS NEVER GOOD NEWS! CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW FOR SOME GREAT MEMORY IMPROVING TIPS. |
Forecast for the Week |
A holiday-shortened week is ahead, but that doesn't mean there won't be any news. Tuesday's Consumer Confidence Report will show us how consumers are behaving based on recent economic news and may indicate if increased consumer spending is likely to continue. There will also be important news to note in Thursday's Jobs Report for June, especially given the mix of good and bad news in May's Report. On the good side, the number of Jobs lost in May was much lower than expected. However, the unemployment rate (which is determined from a different survey) came in higher than expected. As mentioned above, last week's Initial Jobless Claims were worse than expected, so this week's report will be interesting to see. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds and rates were able to break above an important level with help from the Treasury auctions. I'll be watching to see if Bonds and rates are able to remain above this level and improve further. Both the Stock and Bond markets will be closed on Friday, July 3 for Independence Day. Have a safe holiday. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Jun 26, 2009) |
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