This week brings us the release of very few economic reports which have the ability to move the markets. Seems like the week will be driven by the headlines, mainly the government's plan to bring stability to the financial markets. As you might know, Sec. Paulson has announced a plan where the government would buy bad debts from banks which will help to create more liquidity and get banks to start lending again. The total cost of the program appears to be around $700billion dollars, but that could increase. Not all the details have been released, but Congress is expected to pass something this week. Until that happens, there will not be much of an appetite for investors to buy mbs or even stocks as the dow is currently down 165 points. What we are seeing is a flight to commodities as gold is up again and so is the price of oil. Both of these are signs of inflation and as you know, inflation is our mortal enemy. Also, there has been a lot of talk about the government bailout being inflationary as it will weeken the dollar and we have seen the dollar rise from 1.39 to 1.46 to the euro.
Today, MBS opened down about 50 basis points causing rates on mortgages to inch up by about a .125 to a .25%. We are hitting a bump in the road to what we still feel is a lower trend to mortgage rates.
Wednesday we have the release of Exiting home sales.
Thursday we have the release of durable goods orders, jobless claims and new home sales
Friday we have the release of Final GDP, and consumer sentiment.
As always stayed tuned to our blog and we will keep you posted.