How low will they go?

Tuesday, August 28, 2007

ECONOMIC DATA / NEWS

The Conference Board’s consumer confidence index dipped from 112.6 to 105.0 in August.  It is no wonder that confidence is down.  The state of the economy is being thrown into question on a daily basis by the media.  Unfortunately, it is the housing and mortgage markets that are getting a bad rap for causing all the problems in the economy.  There are a number of other sectors affecting the economy.  For instance, competition with China has hurt manufacturing, as has the shift away from demand for U.S. automobiles.  Other businesses have had their ups and downs over the last two years as well.  Higher oil and gas prices have done their damage over the last two years as well.  Ironically, plans to purchase a home rose slightly from 3.3% to 3.5%, according to the survey.  As mortgage rates continue to improve and home prices ease, the purchase market should see a nice jolt over the next six months to a year.

This afternoon’s FOMC meeting minutes from their meeting earlier this month will not be an accurate indication of what will occur at their next meeting.  Therefore, it will probably not receive much attention from traders.  If nothing else, it will be interesting to see how much they change at their next meeting, or if they were already leaning toward a rate cut at their last meeting anyway.

TECHNICAL ANALYSIS

The FNMA 30-year 6.0% made a nice late run to close at the 200-day moving average.  It has opened back at that point, although it is currently down 3bp at 100.12.  Aside from hitting a major resistance level, the stochastics are deep into overbought territory, which means that we could see a pull back in prices later today, and possibly for the remainder of the week.

The 10-year Treasury yield was finally able to make a strong break through 4.60%.  This morning it has drifted a little lower to 4.55%.  Remember we’re looking for it to hit 4.45% within the next three weeks, if not sooner.  At this point, the new downward trend line should keep the yield under 4.60%.

Read more articles on our Mortgage News page, or view our entire Mortgage News Archive.

Mortgage News & More Info

Modesto mortgage news feed provided by Winchester Lending Group