This week we get the release of many economic reports, even though this is a shortened week due to Thanksgiving. Before we get into the reports, we did get some big news on Sunday in the form of another government bailout of a banking institution. Citigroup will be given $20 billion and $306 billion of their bad debts will be guaranteed by the government. This capital injection will be in the form of the government buying preferred stock in Citigroup. Stock futures are up quite a bit this morning, so investors seem to be looking at this as a positive. We also found out on Friday more of President elect Obama’s cabinet positions, with the most relevant to us, Treasury secretary, being announced. New York Fed President, Tim Geithner, is slated to be our next Treasury Secretary, and when the news leaked out on Friday, the stock market roared higher. Tim Geithner has been involved since day 1 in managing the current crisis and is more then prepared to step in and take over from Hank Paulson.
Last week finished strong for mortgage backed securities as we finally have closed above a very touch ceiling. Will this trend continue? Hard to say but we should see this morning better rates then we had last week. Now to the data…
Monday
- Existing Home sales, econmists are expecting 5.05 million after last months 5.18million reading.
Tuesday
- Preliminary Gross Domestic Product, which measures the total production and consumption of goods and services in the US. Economists are expecting -0.6%. A weaker number would be a positive of mbs.
- Consumer confidence, economists expecting a reading of 40.0 after last months 38.0 reading.
Wednesday
- Durable orders expected to come in at -2.5% after last months 0.8% reading
- Personal Income, expected to show a rise of 0.1% after last months rise of 0.2%
- Jobless claims, expected to show 540,000, after last weeks 542,000
- Chicago PMI, which measures strength of manufacturing in the Chicago area, expected to come in at 38.5 after last months 37.8 reading
- Consumer Sentiment, expected to come in at 58.0 after last months 57.9.
- New Home Sales, expected to come in at 450,000 after last months 464,000
The most relevant reports to us will be the Prelim GDP, Durable orders and Chicago PMI. We will post each day to let you know how these reports effect the markets and mbs. As a general rule, weaker then expected economic reports generally lead to better buying of mbs leading to lower mortgage rates. This is commonly referred to as a flight to quality. Currently, mbs are slightly lower then close on Friday, but it appears that we will have another volatile day. MBS at open were trading higher then close on Friday but have given back those gains already. We will keep you posted throughout the day as needed.
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