Short note from the desk of Miguel
Velazco Sr., MBA
Week of: Monday, January 09, 2012
Present Market Conditions
This week brings us the release of few pieces of economic data to digest along
with two important Treasury auctions. None of them are scheduled for tomorrow
or Tuesday, meaning all of the week's events will come over two and a half
days. Until we get to the week's first relevant event Wednesday afternoon, look
for the stock markets to be a major contributor to movements in bond prices and
mortgage rates. Stock strength will likely equate into bond weakness and higher
mortgage rates, and vice versa if stocks fall.
The first relevant report of the week is the Federal Reserve's Beige Book
report at 2:00 PM ET Wednesday. This report, which is named simply after the
color of its cover, details economic conditions throughout the U.S. by region.
Since the Fed relies heavily on it during their FOMC meetings, its results can
have a fairly big impact on the financial markets and mortgage rates if it
reveals any surprises, particularly regarding inflation, unemployment or future
The two important Treasury auctions will be held Wednesday and
Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the
more important of the two as it will give us a better indication for demand of
mortgage-related securities. If the sales are met with a strong demand from
investors, we should see the bond market move higher during afternoon trading
the days of the auctions. But a lackluster interest from buyers, particularly
international investors, would indicate a waning appetite for longer-term U.S.
securities and lead to broader bond selling. The selling in bonds would result
in upward revisions to mortgage rates.
Overall, Thursday will likely turn out to be the most important day of the week
due to the Retail Sales report but Wednesday’s Beige Book and 10-year Note
auction may also cause some volatility in the markets. However, any day can
become active if the stock markets show significant gains or losses. Therefore,
I strongly recommend maintaining contact with us as your Real Estate