Mortgage bond prices fell last week pushing mortgage interest rates higher. The bond market took a beating as stocks surged despite mixed data. Existing home sales in November rose a surprising 7.4%.
However, revised gross domestic product figures showed the economy only grew 2.2%, which was weaker than the expected 2.8% mark. Personal income and outlays data came in weaker than expected helping a bit. Unfortunately, the thin trading conditions magnified
the earlier losses and made it difficult to recover. For the week interest rates rose by about 1 3/8 discount points.
The Treasury auctions will take center stage next week. If foreign demand falters we will likely see mortgage interest rates head higher. The bond market will close early Thursday in advance of the New Year's Holiday Friday. The shortened trading week may result
in some market volatility coupled with thin trading conditions likely.
Consumer Confidence Index
The Conference Board releases the Consumer Confidence Index on the last Tuesday of every month. The report details the levels of confidence individual households have in the performance of the economy.
The data is derived from a survey of 5,000 households nationwide. The survey polls consumer opinions on current business conditions, their jobs, their incomes, and their future spending plans.
The consumer confidence index is significant in that it provides a precursor into consumers' willingness to spend in the months ahead. However, many analysts point out that willingness to spend does not always convert to actual expenditures.
Despite economic uncertainty, liquidity issues, and housing market weakness, American consumers continue to spend. However, many analysts question whether consumers can continue to buoy the economy, especially amid rising unemployment and continued tight credit.
This week's release will be eagerly anticipated. Look for any variation from estimates to cause mortgage interest rate volatility. Signs of eroding consumer confidence could lead to improvements in mortgage interest rates. However, stronger than expected figures
could spike rates higher.
With mortgage interest rates relatively low, capitalizing on current levels is recommended to protect against future volatility. Remember, mortgage interest rates tend to trend lower slowly, while increases tend to occur quickly. A cautious approach is necessary
to protect from future market volatility.