Mortgage Rates Move With Data, September 14, 2010

Today for mortgage rates, it's all about the consumer as the monthly retail sales figures for August are released.  Also, the US government is increasing pressure on the Chinese government to allow the value of its currency to increase.

Mortgage Rate Trend Direction:     Down

Economic Reports/Rate Impact:    Retail Sales, 8:30 AM ET, High Rate Impact

Key News:                                          Small Business Owners Survey, China's currency value

Summary

Mortgage-backed securities (MBS) were a popular investment yesterday despite another positve day for stocks.  The reason was likely more related to market technical factors and trader's needs to take new postions than to market fundamentals.  Today will provide a better read on economic trends, as the retail sales figures for August are released.  However, I expect mortgage rates to drop slightly today, based on early bond trading trends--even though market fundamentals point in the opposite direction! 

Impact of economic reports

The retail sales report is released monthly and provides one of the best reads on the strength of the US consumer.  The report for August was better than expected and provided positive movement for the stock market immediately upon release.  Tomorrow we will find out if the positive trend in data can continue as we get results for the manufacturing sector.

One unnofficial report released today was a survey on the sentiment of small business owners by the National Federation of Independent Businesses.  The survey showed an improvement, though only slight in the optimism of small business owners.  Nevertheless, improvement in the sector that creates the most jobs could be a very positive sign.

Impact of economic or political events

The yuan, the currency of China rose to it's high since 2005 in trading today.  While this is positive for US exporters, American politicians believe that the currency is still significantly undervalued.  Most analysts expect China to hold the value of the yuan fairly close to current levels, then gradually allow it to rise as the gloabl economy improves.