Weekly Mortgage Overview: 10/21/2013

This is a huge week for economic data with several of the major economic reports that were held up due to the shutdown hitting the wires this week.

The biggest focus this week will be on Tuesday’s Non-Farm Payroll (NFP) release and Friday’s Durable Goods Orders. The NFP report has taken a very important role in the marketplace as bond traders have been using it as a proxy to determine when the Federal Reserve is likely to begin to taper their monthly MBS and Treasury purchases. Ultimately, when the Fed does begin to taper, mortgage rates will rise.

However, now the market believes that regardless of how strong or weak the NFP readings are, the Fed is forced to stand pat on their massive bond purchase program until March or June of next year. This is due to the fact that the debt ceiling will be renegotiated once again in February and the first Fed meeting after that new negotiation will be in March. Since that will be only a month after the new deal, the economy won’t have an opportunity to adjust by the March Fed meeting. Plus, if Congress just kicks the can down the road again in February with another short term extension, the Fed will have to keep their bond purchase program going. This means that rates are likely to remain in a relatively low range for several months. 

Releases will be out for both Existing Home Sales (today) and New Home Sales (Thursday), which will give a good pulse on the housing market this week.

There are three U.S. Treasury auctions all on the same day, October 24th: 2, 5, and 7-year Notes.

What is on the agenda for this week?