THE BASIS POINT

Rates Even On Conflicting Data: Consumer Confidence Up, Home Prices Down, UK Economy Shrinking

 

It’s a day of conflicting data in rate markets. Consumer Confidence was up way more than expected and if this confidence translates into spending, it pushes rates higher. But offsetting this rate trade are two other pieces of data: home prices continue their decline, with today’s S&P Case Shiller report showing a sixth month of consecutive home price declines. And in the UK, they reported that the economy contracted by 0.5%.

The net result is single family home rates up to $417,000 holding at about 4.875%, with higher loan amounts and condo rates being higher. Today begins this week’s $99b in Treasury auctions, with the results of today’s $35b 2yr note auction due shortly. Sometimes this additional supply to bond markets disrupts the mortgage bonds that rates are tied to, causing rates to rise. Also today begins the Fed’s first rate policy meeting of 2010 with their decisions and economic outlook being announced tomorrow. Today’s conflicting data will likely be the trend for the coming 1-2 months as markets sort through good and bad reports, and the net result is that rates are likely to remain in their current range until some substantial weak or strong economic clues how rate traders the way. So the consumer can continue to benefit from near-record lows.

 

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