I managed to pull off another week of writing this in the United States, and mortgage rates managed to tick higher, yet again.  I guess the Fed is waiting on something else (maybe a new infusion of cash from Congress?) before they try to drive rates lower, or even keep them level.  It does sound like Obama and his Democratic buddies are ready, willing and in all likelihood, able, to spend exuberant amounts of money to drive rates down and “lower mortgage costs”, which should likely scare you and all the borrowers out there.

Well, as I said last week, mortgage backed securities would be under selling pressure this week, and indeed they were, even in the midst of favorable economic data.  In the end, mortgage rates ended the week around 0.25%, but let’s look at what happened throughout the week. 

Treasury Auctions were rather mixed, with short term auctions meeting marginal demand and drawing slightly higher yields.  The 5-year auction went fairly well and even had fairly decent foreign participation, with yields ending at 1.82%, and the 20-year TIPS coming in at 2.50%.  Data wise, we saw continued problems in the housing market on several occasions, along with dismal numbers across the board when it came to the economy, with Friday’s list of data all missing their expectations.  The good thing is that despite the increased inflationary expectations, the data is showing recessionary concerns still outweigh inflationary ones.  And yet, mortgage backed securities fell and mortgage rates rose.

What’s in store for this week?  We start the week off with a report that is the Fed’s favorite.  Personal Consumption Expenditures (aka Personal Income and Outlays) has already come out, which I break down in detail over at Florida Mortgage Daily.  We also have several other key players, as well as more Treasury Auctions (they need to fund their stimulus packages).  And, of course, it’s will be the first Friday of the month and that means the Jobs Jamboree is coming.  Here is the rundown…

• Monday:  Personal Income and Outlays (PCE, Personal Spending and Personal Income) (8:30), ISM Index (10:00), 3-month Bill Auction (1:00), 6-month Bill Auction (1:00)
• Tuesday:  Pending Home Sales (10:00), 4-week Bill Auction (1:00)
• Wednesday:  ADP Employment Report (8:15), ISM Services Index (10:00), Crude Inventories (10:30)
• Thursday:  Jobless Claims (8:30), Productivity and Costs (8:30), Money Supply (4:30)
• Friday:  Non-farm Payrolls (8:30), Unemployment Rate (8:30), Average Work Week (8:30), Hourly Earnings (8:30), Consumer Credit (3:00)

As you can see, all eyes will likely be focused on a dismal economy with inflationary fears taking a back seat.  However, that was the case last week as well and mortgage backed securities plummeted, causing mortgage rates to rise, so what can be expected this week?

Mortgage bonds have fallen through another layer of support and now take aim at testing their 50-day moving average.  The good news is that they have moved into an oversold situation according to stochastics, so a correction is coming, it is just a question of when.  The bottom line, though, is they have broken out of their trading range that was caused by the artificially inflated prices due to the Fed’s buying, so the Fed is about the only way we will see lower mortgage rates for the foreseeable future, minus the corrective period.