The lowest rates of the week were seen ahead of the announcement that FASB would relax "mark to market" accounting policies.  As the week progressed and positives poured from the G20 summit, stocks began to show a great deal of optimism that financial markets were nearing a bottom; consequently investors vacated safe haven investment positions(treasuries and MBS) which pushed mortgage rates steadily higher.  By Friday, consumer borrowing costs had increased by .375 to .50 points.   Friday’s release of the Employment Situation report did not support the notion that markets have already hit bottom, but keep in mind that investors look forward about 6 months when making stock market investment decisions while most economic reports look backwards.

The economic calendar is fairly light for the week ahead.   Usually when economic data is light, mortgage rates take their directional guidance from the movement of money between stocks and bonds.  In this economic environment headline news should never be overlooked.

Onto the data:

Monday

-          No economic data other than the Treasury department announcing details regarding Wednesday’s 3 yr note auction and Thursday’s 10yr note auction.

Tuesday

-          Consumer Credit which represents the dollar value of consumer credit outstanding.  Economists are expecting this report to show a decline of $-3.0b after last months surprising increase of $1.8b.   A rise in consumer credit might signal future spending which would be a positive for the economy but could lead to future inflationary pressures.  Higher inflation would cause mortgage rates to rise.

Wednesday

-          Treasury Auction of 3 year notes.  Anytime there is a treasury auction, investors look for high demand especially from foreign buyers.   With the added supply of debt on the market, it will apply pressure on treasuries to move higher in yield, which adds anxiety to mortgage rates to follow.  If treasury yields rise, MBS yields could also rise and mortgage rates follow.

-          Federal Open Market Committee Minutes.  The minutes of the previous meeting are released 3 weeks after the meeting and give investors clues as to what the Fed’s future monetary policies might include.  Since the Fed is very transparent, most of the information from the minutes is already known but investors will read the minutes closely for any tidbit of meaningful information.

-          MBAA Weekly Mortgage Applications Index. We expect that borrower's demand for new mortgages may have slowed down slightly last week due to the fact that mortgage rates moved slightly higher.

Thursday

-          Import and Export prices.   This report gives investors a gauge on inflation domestically and abroad.  Since inflation is the biggest enemy of mortgage rates, MBS tend to improve when import prices come in lower than expectations.   Last month this report indicated that import prices excluding oil had dropped by 0.6%.

-          International Trade, this report measures the difference between what goods and services we export and what goods and services we import.  Most economists expect this report will indicate the trade gap has increased to -$36.5bn following last month's reading of -$36.0bn.

-          Jobless Claims, economists are forecasting 664,000 initial jobless claims following 669,000 last Thursday.  Higher unemployment tends to keep wage based inflation in check, so MBS tend to hold ground or improve with a higher reading. However at some point mortgage investors may also begin to consider the effects of higher unemployment on borrower's abilities to service their mortgage debt.

-          The Treasury Department will auction 10 year treasury notes.  The added supply of debt on the market, can apply pressure on treasury yields to move higher which might cause mortgage rates to follow. We find out how much debt will be auctioned at 11am today.

-          The Federal Reserve will announce their weekly Agency MBS Purchases.

Friday

-          Treasury Budget, which is released by the US Treasury and reports a monthly account of the surplus or deficit of the federal government.  The consensus is for a $-150b deficit after last months $-192.8b deficit.  Adam, over at the MBS Commentary Blog, will provide much more in depth information on this report once it is released.   For the current fiscal year which is 5 months old, the deficit has already ballooned to $764.5 billion. 

That’s it as far as economic data.   So far this morning, MBS are slightly higher but not enough to encourage lower mortgage rates.  Early reports from fellow mortgage professionals are showing par rates between 4.625% and 4.875% for well qualified consumers.   To get a par rate on your mortgage you must have credit scores over 740, fully document your income and pay all closing costs associated with your mortgage including 1 point loan origination.