Mortgage Rates Like the Environment, August 26, 2010

Mortgage Rate Trend Direction:     Neutral/Down

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

Key News:                                          Jackson Hole Economic Summit

Summary

Yesterday was volatile, with improvements in mortgage pricing early but a late day reversal.  Traders took the opportunity to make money on both ends of the action.  Today the Jobless Claims report will be the early driver of mortgage-backed securities market and, in turn, mortgage rates.  Later in the day news from the Jackson Hole Economic Summit may influence markets as analysts anticipate a speech tomorrow from Federal Reserve Chairman Ben Bernanke.  With the data available, I expect mortgage rates to begin the day neutral with a bias to moving lower.

Impact of economic reports

The Jobless Claims report came in lower than anticipated.  Stocks rallied immediately on the announcement and mortgage-backed securities sold off.  Upon closer inspection the report may be viewed in a more negative light as the average for new claims over a multi-month period is still climbing.  Last week's surprisingly high report makes this weeks report look like an improvement, yet the trend is still decidedly negative.  As I write these words, mortgage-backed securities are climbing again.

Tomorrow revised Gross Domestic Product numbers will be released.  Expectations are that the report will show that our economy has slowed dramatically and will likely slow further during the balance of 2010.

Impact of international or political events

Federal Reserve Chairman Ben Bernanke will deliver a speech outlining his assessment of the economy, but more importantly he will provide a "menu" of actions that he believes could be undertaken by the Federal Reserve to stimulate the economy.    This speech may impact markets and mortgage rates for some time to come.