WRS Report 3/30/2009
March 30th, 2009 10:02 AM
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Market Comment - Week of March 30th, 2009

Mortgage bond prices fell last week applying upward pressure on mortgage interest rates. The bond market got a shock from a surprise increase in new home sales, stronger than expected durable goods orders, and some stock strength. There were also concerns about the US dollar in general and dollar denominated securities as China expressed interest in substituting the yuan to dollar peg in exchange for a new international currency. Fortunately the Fed continued to come to the rescue buying mortgage backed securities in an effort to keep interest rates relatively steady and low. For the week, interest rates on government and conventional loans rose by about 1/8 to 1/4 of a discount point.

The employment report Friday will be the most important economic release this week.

Economic Factors
Economic Indicator
Release Date Time
Consensus Estimate
Consumer Confidence
Tuesday, March 31, 2009
Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
ADP Employment
Wednesday, April 1, 2009
Dow 648k
Important. A measure of employment. A larger decrease in payrolls may bring lower rates.
Construction Spending
Wednesday, April 1, 2009
Down 2.0%
Low importance. An indication of economic strength. A significant decrease may lead to lower rates.
ISM Index
Wednesday, April 1, 2009
Important. A measure of manufacturer sentiment. A large decline may lead to lower mortgage rates.
Factory Orders
Thursday, April 2, 2009
Down 1.3%
Important. A measure of manufacturing sector strength. A larger decrease may lead to lower rates.
Friday, April 3, 2009
8.5%, -657k
Very important. An increase in unemployment or a larger decrease in payrolls may bring lower rates.

Consumer Confidence

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 tightening 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.

Posted in:General
Posted by Philip Jernigan on March 30th, 2009 10:02 AMPost a Comment

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