Paul Bresee's Mortgage Market News

I hope this will help some of you understand what drives the mortgage rates daily. This report is telling us that it is a good idea to not lock your loan today. there may be changes that could force Mortgage rates lower.

Current Trend Direction: Sideways

Risks favor: Floating

Current Price of FNMA 3.5% Bond: $100.84, +19bp

The recent spike in Bond market volatility continues today.  Mortgage Bonds are trading higher on the day, but are already well below the best levels of the session.

Third Quarter earnings season continues for Stocks, and banking giant Citigroup reported this morning, posting slightly better than expected earnings. There will be 11 Dow components reporting this week, along with 109 S&P 500 companies.  Tech bellwethers Apple and IBM are set to report after the close of trading today.  The results and future guidance reported by these corporations could have an impact on the direction of both Stocks and Bonds.

The economic report calendar is light this week, however, there are plenty of Fed Members hitting the podium, including  Atlanta Fed President Dennis Lockhart later today, followed by tomorrow's hit parade of Chicago Fed President Charles Evans,  New York Fed President William Dudley,  Fed Reserve Governor Elizabeth Duke and, Fed Chairman Ben Bernanke.  Philadelphia Fed President Charles Plosser and Richmond Fed President Jeffrey Lacker will take the stage on Wednesday, and St. Louis Fed President James Bullard along with KC Fed President Thomas Hoenig will speak on Thursday.   

That's the biggest line up of Fed commentary in one week than has been seen in a very long time, and after Friday's speech by Ben Bernanke, the market is primed to expect more Quantitative Easing (QE2).  But what the market doesn't know, and could be looking for clues from the panel of speakers this week, is how much money is the Fed going to commit, what exactly they will be buying, and when the spending spree might start.  These speeches have the potential to add to the already incredible market volatility.

In economic news, manufacturing sector data arrived, with Industrial Production coming in at - 0.2%, a bit below expectations of 0.2%.  This was a poor number and the first negative reading on Industrial Production in seven months.  This weak number, along with the recent string of not-so-good economic readings, further support the Fed's position of QE2.  Capacity Utilization - which measures how much of  the total production capacity is being used in a manufacturing setting - was reported at 74.7%, meeting expectations, but remaining well below the 81% average seen in the 37 years prior to 2010.  This highlights the overall continued lackluster consumer demand in the economy…and consumer demand won't pick up significantly until we see meaningful improvement in the labor market.

Bond prices remain above a dual layer of support at the 25 and 50-day Moving Averages, and we will start the day by Floating.