Mortgage news- Rates are slowly rising!

Market Comment - Week of January 24th, 2011
Mortgage bond prices started in negative territory and that carried through most of the week. Spain and Portugal had relatively successful bond auctions, which reversed the flight to quality buying of US debt instruments that helped rates fall. Lower than expected weekly jobless claims Thursday added to the losses causing rates to spike higher. Analysts were looking for jobless claims at 425k and the actual release showed claims at 404k. Leading economic indicators were higher than expected with an increase of 1% compared to the anticipated 0.6% increase. Mortgage bonds ended the week negative by about a full discount point.

The Fed meeting will take center stage this week. Look for the continued Treasury auctions to also factor into mortgage interest rate changes.

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Economic Factors
Economic Indicator	Release Date Time	Consensus Estimate	Analysis
Consumer Confidence	Tuesday, Jan. 25, 2011	54.2	Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
2-year Treasury Note Auction	Tuesday, Jan. 25, 2011	None	Important. $35 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
New Home Sales	Wednesday, Jan. 26, 2011	300k	Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
5-year Treasury Note Auction	Wednesday, Jan. 26, 2011	None	Important. $35 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Fed Meeting Adjourns	Wednesday, Jan. 26, 2011	None	Important. Few expect the Fed to change rates, but volatility may surround the adjournment of this meeting.
Weekly Jobless Claims	Thursday, Jan. 27, 2011	425k	Important. An indication of employment. Higher claims may result in lower rates.
Durable Goods Orders	Thursday, Jan. 27, 2011	1.9%	Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
Advance Q4 GDP	Friday, Jan. 28, 2011	3.8%	Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.

Fed Focus

The United States central bank, the Federal Reserve, coordinates the borrowing and lending activities of federally chartered banks. The principal reason the Federal Reserve was created was to reduce severe financial crises. One way of accomplishing this goal is to control the amount of money that flows through the economy. By manipulating the US money supply, the Fed influences inflation, unemployment, and the level of US economic activity. The Fed has a variety of tools that it uses to control the money supply, but its chief policy tool is the manipulation of short-term interest rates.

No rate changes are expected at the Wednesday meeting but there is concern about the future considering the Dallas and Kansas City Federal Reserve banks requested a discount point hike.

-W.R. Starkey Newsletter