Mortgage Rates Continue To Find New Lows, August 12, 2010

Mortgage Rate Trend Direction:     Neutral/Higher

Economic Reports/Impact:              Jobless Claims, 8:30 AM ET, High Rate Impact

Key News:                                           US Companies Earnings, International Reaction to Fed Comments

Summary

The US Federal Reserve's decision on Tuesday to take steps to support a weakening economy in the US through purchase of US Treasury issues with the proceeds of maturing mortgage-backed securities investments, is dominating markets across the world.  Stock markets are down across the globe today and look to open even lower in the US from their significant drop yesterday.  Mortgage Rates dropped yesterday as mortgage-backed securities provided an alternative to equity investments.  Today, mortgage rates look to open neutral, with a bias to higher pricing, despite continuing weakness in stocks.

Impact of economic reports

The Jobless Claims report this morning surprised analysts with another increase in initial filings for jobless benefits.  Expectations were for the trend to begin to show a decline in initial jobless claims.  While, surprising the results do not represent a significant move in direction or intensity.

Cisco the major US technology firm reported generally positive earnings yesterday, yet comments by its CEO about prospects for the balance of the year has spooked traders.  CEO John Chambers used language that lead traders to assume that he expected a significant slowdown in the 3rd and 4th quarters.  Today he is making the rounds on the business networks attempting to paint a more positive picture.

Impact of political or international events

Gloabl markets are adjusting to the clearly weakened economy and prospects in the US, while signs of weakness in both Europe and China are beginning to appear in reports on their economies.  Tracking the responses of the Central Banks in these markets over the next several weeks will give us insight into whether a worldwide recession can be averted.