Mortgage Minute or Two

Mortgage rates improved slightly last week, with bad news on the economy helping the mortgage bond market more than good news hurt it! Here's a brief recap of economic releases from last week:

• Crude Oil Inventories were reported lower than expected, although this was offset by a decrease in the cost of oil and a decrease at the pump.
• Existing Home Sales came in lower than expected, but then New Home Sales came in a bit stronger than expected.
• First Time Unemployment Claims jumped back over the "recessionary" 400,000 level, which was much worse than the markets were anticipating.
• Consumer Sentiment figures were much better than expected, which was a very positive sign.
• Finally, Durable Goods Orders for June were reported much better than expected.

So, with some news coming in good, and some news coming in bad, mortgage bonds took their cue from stocks, oil prices and the latest Fedspeak, and finished slightly better on the week. The cost of oil dropped to around $123 per barrel, and a dip in the price of gasoline is expected to follow.

The markets seemed to ignore warnings on inflation by a couple of Federal Reserve Bank Presidents. The Fed's way of combatting inflation is to raise short term interest rates. While they are unlikely to do so at their next meeting on Tuesday, August 5th, they may have to in subsequent meetings. The problem that they face is that if the economy is not showing enough signs of strength, an increase in short term interest rates may stifle any growth that there is.

Here's what's due to be released this week (shown with it's typical impact on mortgage rates):

• Tuesday - Consumer Confidence (Moderate)
• Wednesday - Crude Oil Inventories (Moderate)
• Thursday - Gross Domestic Product (GDP) for 2nd Quarter of 2008 - (Moderate)
• Thursday - GDP Chain Deflator, a measure of inflation (HIGH)
• Thursday - First Time Jobless Claims (Moderate)
• Thursday - Chicago PMI (HIGH)
• Friday - The "big" report of each month - the monthly employment report, including Jobs Created or Lost (HIGH), Average Work Week (HIGH), Unemployment Rate (HIGH), Hourly Earnings (HIGH).
• Friday - Industrial Supply Manager's Index (HIGH)

Hopefully mortgage bonds will be able to continue the rally that they started last week, and we can see some further improvement in mortgage rates. I will keep you posted on any major developments or movements in rates.