Market Review

Market Comment
Mortgage bond prices fell pushing rates higher last week. Bonds were driven lower following comments by Richmond Federal Reserve President Lacker who indicated housing would be a drag on the economy for the next few quarters and future price pressures are a concern. Continued stock strength also pressured bonds lower and rates higher.
For the week, interest rates on government and conventional loans rose by about 1/2 of a discount point.
The Fed minutes, preliminary GDP, and employment report will be the most important events this week. Consumer confidence, income, outlays, ISM Index, and consumer sentiment data will also be important.
LOOKING AHEAD
EconomicIndicator
ReleaseDate & Time
ConsensusEstimate
Analysis
Memorial Day Holiday
Monday, May 28
Important. Volatility may occur as trading resumes Tuesday and trading week is shortened.
Consumer Confidence
Tuesday, May 29,10:00 am, et
104.5
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
Fed Minutes
Wednesday, May 30,2:00 pm, et
Very Important. Details of the last Fed meeting will be thoroughly analyzed.
Q1 Preliminary GDP
Thursday, May 31,8:30 am, et
Up 0.7%
Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Construction Spending
Thursday, May 31,10:00 am, et
Unchanged
Low importance. An indication of economic strength. A significant decrease may lead to lower rates.
Employment
Friday, June 1,8:30 am, et
Unemp. @ 4.5%,Payrolls +140k
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
Personal Income and Outlays
Friday, June 1,8:30 am, et
Income up 0.4%,Outlays up 0.4%
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
ISM Index
Friday, June 1,10:00 am, et
54.0
Important. A measure of manufacturer sentiment. A large decline may lead to lower mortgage rates.
U of Michigan Consumer Sentiment
Friday, June 1,10:00 am, et
88.5
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
Fed MinutesThe Federal Open Market Committee decided in December of 2004 to reduce the lag time between the open market committee meeting and the release of the minutes from six to eight weeks to only three weeks. The minutes from the meeting have the ability to cause mortgage interest rate volatility because they provide more policy details than the standard post meeting release. Most importantly the minutes provide the Fed’s complete economic analysis and the various opinions of individual Fed members. There is typically an overwhelming consensus among the members. However, there can also be dissension, which often causes uneasiness in the financial markets. The release often comes and goes without much uproar but keep in mind that if any of the text seems troubling to analysts you can see market volatility.
Remember that mortgage interest rates remaining historically favorable. Capitalizing on current levels is prudent.
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Copyright 2007. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com The information contained herein is believed to be accurate, however no representation or warranties are written or implied.