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Mortgage Market Weekly - Mortgage Rate Forecast - December 26, 2010

I apologize for not uploading this last week, but I am hopefully not going to miss another one.  Also, don’t forget my weekly Mortgage Market Weekly radio show, every Monday at 12:00 noon Eastern Time.  The bottom line for this week is that mortgage rates do not seem anxious to improve and continue to drift higher in pricing.  The overall outlook remains favorable for mortgage rates to continue their climb.


I hope you all had a wonderful Christmas and extended weekend.  Now it s time to get down to business, at least for a few more days as we are in another holiday-shortened trading week as we approach the 2011.

Last week saw a reasonable amount of volatility, but no real movement in MBS prices.  In fact, by the end of the week, MBS prices had drifted lower by 12bps overall as MBS prices rose a little, then fell back.  Economic data was scarce at the beginning, actually absent for Monday and Tuesday, then heated up on Wednesday and into Thursday.

MBS prices hugged their 10-day moving average as the week got started with the 3-month and 6-month Treasury auctions seeing slightly reduced demand.  St. Louis Fed President James Bullard also stated that the Fed's stimulus provision is reviewable and changeable.  Those recommending "floating" issued lock alerts as the day turned negative.  Tuesday saw MBS prices have arguably their most volatile day of the week as they started higher, fell, then closed at their highest levels of the day.  Again, floating guidance was changed to lock alerts amidst the volatility.  Fed market manipulation was the the reason for the afternoon rebound. 

Wednesday, data began rolling as we saw that Purchase Applications dropped 2.5% and Refinance Applications dropped 24.6%.  GDP was just below expectations, as was Existing Home Sales, though the latter was up 5.6%.  We saw MBS prices drop to their 10-day moving average yet again, though they ended Wednesday down just 3bp.  Thursday was the major data play as the week drew to a close and the bond markets closed early.  Jobless Claims were inline with expectations.  Durable Goods Orders were mixed and inflation according to the Fed's favorite gauge was tame yet again.  Consumer Sentiment was below expectations, but was still at 74.5, its highest level since June.  New Home Sales followed Existing Home Sales advice and rose 5.4%.  By Thursday's close, MBS prices had fallen on the day, ending the week down 12bp and roughly at their 10-day moving average.


This week will be another shortened trading week as we close 2010 and begin 2011.  The week ahead will be interspersed with Treasury Auction and Economic Data, some of which is significant and may firm up the outlook for mortgage rates.  Again, with us currently amidst the holidays, trading could get volatile and the final outcome may not be "perfect" guidance for the future as we will not have the normal trading volumes. 

As of writing, this is what this week's schedule looks like:

  • Monday:  3-month T-Bill Auction, 6-month T-Bill Auction, 2-year T-Note Auction
  • Tuesday:  S&P Case-Shiller HPI, Consumer Confidence, 5-year T-Note Auction
  • Wednesday:  MBA Purchase Applications, Crude Inventories, 7-year T-Note Auction
  • Thursday:  Jobless Claims, Chicago PMI, Pending Home Sales Index
  • Friday:  HAPPY NEW YEAR

Just like last week, Thursday will be the day that should have the most impact.  Treasury auction results will also be a player this week, though their volumes will likely be down, causing decreased demand to be seen, which may weigh on MBS prices as well.

If you would like my in-depth technical analysis, make sure you listen to my Mortgage market Weekly radio show at Blog Talk Radio.  Don’t forget to subscribe to Mortgage Rate Forecaster by week’s end to beat my price increase and get access to my daily mortgage rate forecasts that have the most accurate track record for the past 6 years.  This is a MUST service if you do not want to lose more money following those other “well-known” mortgage rate alert services that continue to issue erroneous advice only to issue alerts later, sometimes less than 30 minutes later.

Comment balloon 2 commentsRobert D. Ashby • December 26 2010 04:19PM
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