The first look at the US Gross Domestic Product for the 4th quarter of 2004 was the strongest in 1 ½ years. And while news of economic strength usually sends mortgage rates higher today it appears to be sending them lower. Why? Because the expectations of economists prior to the report’s release was for even stronger growth. Perhaps traders of stocks and mortgage-backed securities will realize that this data is hardly worth relying on for guiding their positions since this early look at GDP each quarter is often revised significantly before being finalized. This report will be revised on February 29 and won’t be finalized until March 29. According to the US Bureau of Economic Analysis, the group that produces the GDP reports the average change between the “Advance Estimate” and the “Final” is greater than 1.0%! So despite the early improvement in mortgage rates this morning, consumers needing a mortgage for a refinance or purchase should not expect further moves down today.
Reports out of Europe suggest that a deal between Greece and its private bond holders to reduce their payout is “very close”. While I know we have heard this before—I actually believe it because these bond holders really have no viable alternatives. Should they allow Greece to default in a disorderly manner it would put all their other European debt holdings at much greater risk as global investors would likely devalue all things European.
At 10 AM ET today the January Consumer Sentiment report will be released. Expectations for this report are for it to be flat—but flat at a very strong level. Should this report surprise significantly it could move mortgage rates. I do expect this report to come in close to expectations—or if there is a surprise for it to be to the high side. If I am correct than the greater risk later today is for a slight uptick in mortgage costs rather further improvement.
Have a great weekend!
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