After Friday’s sell-off, mortgage backed securities are up this morning from Friday afternoon. Some of the key economic releases this week include tomorrow’s home price index and FOMC minutes, Thursday’s ISM and Friday’s August unemployment report.
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Yesterday’s release of the FOMC minutes showed a cautious Fed with a downward revision to 2010 growth. Most investors had already speculated that the Fed would remain accomodative over concerns that the economic recovery is slowing. Initial claims continue to show no real signs of improvement. The continuing claims fell, but it is widely believed that the decline in the number of people receiving benefits is due more to people running out of benefits than a surge in hiring.
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Treasuries and mortgage bonds open modestly higher this morning, fueling hopes that the slide in fixed income prices might be stopping.
FOMC meeting minutes will be released at 2:00 PM today. Markets will pour over the notes to look for clues about future policy changes.
Specifically, investors will look for any hints as to when the Fed may change or drop the phrases “exceptionally low” and “extended period” as used to describe the current rate environment.
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Yesterday’s FOMC minutes maintained the “exceptionally low levels of the federal funds rate for an extended period.” The FOMC also reiterated the MBS (Mortgage Backed Securities) purchase program is “nearing completion and the remaining transactions will be executed by the end of this month.”
Treasuries are fairly unchanged after the PPI report showed that producer prices fell more than forecast last month, signaling there are reduced inflation pressures.
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