Mortgage rates today start the week near all-time lows and are poised to see only slow movement in either direction. With such dramatic moves last week and the economic reports this week being less significant than last, we are likely to see less volatility.
On the docket this week are discussions between French President Nicolas Sarkozy and German Chancellor Angela Merkel tomorrow to discuss the European Debt crisis. Also of importance this week will be industrial production on Tuesday, and inflation reports Wednesday and Thursday with the Producer Price Index and Consumer Price Index respectively.
The discussions between the French and German leaders tomorrow are expected to come up with strategies for dealing with the debt crisis that has reached a critical point. Some European countries, notably Italy, is pushing for the development of a European Bond that would be backed by all members of the European Union. France and Germany, who would be the principal backers of this bond, have already rejected the idea. However, officials in the United Kingdom have said that they were open to discussions of a closer “fiscal union” among the 17 members of the Eurozone. Some backstopping of the debt of weaker members and for European banks which hold the bonds of these weak members will be expected by the markets.
Only one economic report will be released today—the Empire State Index, which measures manufacturing activity in the New York Federal Reserve Bank region, is anticipated to show a decline in manufacturing. However, this report is notorious for huge volatility month-to-month and does not cover a major manufacturing area. Tomorrow’s industrial production report will give a much better view of manufacturing activity and is actually expected to show a slight increase.
We have reached that time of the year where many market participants are squeezing in last minute vacations prior to the start of school. Congress is in recess and the President is heading on vacation himself, after a quick political bus tour of the Midwest. Taken together we are likely to have a couple of weeks of less volatility in the markets and in mortgage rates than we have just come through.
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