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The week that was

This week didn’t have much in the way of economic data; weekly claims declined 26K. U. of Michigan consumer sentiment index jumped to a stronger read than expected but somewhat ignored as recently it has become more volatile. In my view the most significant data this week was the July consumer credit data on Tuesday; credit was expected to have shrunk by $4.1B, it crashed $21.6B and June consumer credit was revised lower, from -$10.3B to -$15.5B. Consumer credit has been declining now for five months and we expect it to continue; markets however, took a look and ignored the potential impact for economic growth. Mortgage markets as reported by the MBA had a very good week last week; the overall applications index jumped 17.0% as mortgage rates worked lower.

Freddie Mac weekly Primary Mortgage Market Survey® for 30-year fixed-rate mortgage (FRM) averaged 5.07 percent with an average 0.7 point for the week ending September 10, 2009, down from last week when it averaged 5.08 percent. Last year at this time, the 30-year FRM averaged 5.93 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.51 percent this week, with an average 0.5 point, down from last week when it averaged 4.59 percent. A year ago, the 5-year ARM averaged 5.87 percent.

Note that these rates are for loan amounts under $417,000. Higher loan amounts typically have higher interest rates.

The week that will be

Next week there is a lot of data; retail sales, housing starts and permits, industrial production and factory use, the Philly Fed business index are all key (also PPI and CPI but neither will be much of a concern). Next week we expect an increase in market volatility with the range of data. While we still expect interest rates to work a little lower, the week ahead may pull rates back higher.