Mortgage Rates Guided By Durable Goods, September 24, 2010

Durable goods orders and existing real estate sales will provide direction to the markets and mortgage rates today. Additionally, analysts will watch the currency markets for signs of Japanese intervention to support the yen.

Mortgage Rate Trend Direction:     Up

Economic Reports/Rate Impact:    Durable Goods Orders, 8:30 AM ET, Moderate Rate Impact

                                                              Existing Home Sales, 10:00 AM ET, Moderate Rate Impact

Key News:                                           GOP's "Pledge to America"

Summary

Yesterday ended with a slight drop in the popularity of mortgage-backed securities.  Today that weakness appears likely to continue and will be reflected in initial mortgage pricing this morning.  Orders for durable goods (aircraft, autos, appliances, etc.) for last month will be reported early this morning, with existing homes sales figures due mid-morning.  I expect mortgage rates to be higher to begin the day, but Friday's often see a return to neutral by the end of trading.

Impact of economic reports

Durable goods orders for consumer products dropped to their lowest level in a year last month.  However, markets were encouraged by an increase in such purchases by businesses.  This could mean that businesses see an increase in demand for their goods or services in the months to come.

Later this morning we will get last month's exisiting home sales figures.  Expectations are for a modest increase in sales from the previous month.  A surprise drop would be negative for the stock market and positive for mortgage rates.

Impact of international or political events

Yesterday the Republican's in the US House release their policy platform known as the "Pledge to America".  I bring it up, not to critique it or endorse it, but simply to illuminate how the political environment has changed over the past two years.  Many of the items in this document have to do with reducing government spending and reducing government involvement in general.  It is striking how different this is from the political conversation that preceded the previous election.  We are moving forward from emergency fixes for our economy to long term fixes that will take the US economy forward for decades to come.  Don't get me wrong--we needed the emergency fixes, but now we need a sustainable path that balances personal responsibility and government backstop.  Simply beginning that conversation is reason for optimism.