David Kimmer

Daily Commentary

By Larry Baer, Market Alert

Housekeeping Notes:

The mortgage market will be closed on Monday, October 12th in observance of the Columbus Day Holiday. Stock markets will be open on Monday and will operate on a normal schedule.

SHORT-TERM TREND (10 days or less). Favors higher rates and lower investor prices.

LONG-TERM TREND (11 days or more) Favors higher rates and lower investor prices.

Commentary: The mortgage market woke up to a "Maalox moment" this morning - created in equal parts by comments Fed Chairman Bernanke made last night at a Fed conference in Washington and the "hangover effect" of yesterday's lackluster 30-year bond auction.

In his comments Bernanke clearly sent a signal that the Fed is gradually but steadily moving toward an exit from its supportive policies, even while evidence of the economic recovery remains mixed. Mortgage investors hate to see the Fed's support for progressively lower interest rates come to an end - but the house lights are coming up - its "last call" - and no one wants to miss this opportunity to cash in some outstanding marketing gains.

Looking ahead to the upcoming holiday shortened week -- mortgage investors will be intently interested in Wednesday's September Retail Sales figures and Thursday's September Consumer Price index. Most analysts expect the September retail sales data to show consumers have retreated en masse from the market place - choosing to spend only on necessities - and then only buying at discounted prices. The inflation threat as defined by the core consumer price index is expected to remain benign. If the actual data confirms assumptions (a high probability outcome) -- these two reports will likely exert little, if any upward pressure on mortgage interest rates.

THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME