Jeff Edwards/CS Financial

August 28, 2006 - Interest Rate Update

Current Trend Direction: Sideways
Risks favor: Neutral to Locking

Mortgage rates remain in a sideways trading pattern, while hovering around their 200-day moving average. There will be an onslaught of economic news releases this week, capped off by the all-important Jobs Report on Friday.

Wednesday brings the preliminary second quarter Gross Domestic Product (GDP) with its inflation-measuring chain deflator. The Commerce Department is also scheduled to release its Personal Income and Spending reports for July, and these have one of the Fed’s favorite measures of inflation imbedded in them – the Personal Consumption Expenditures (PCEs).

The most significant report this week comes out first thing Friday morning, when the Labor Department releases its new employment data for August. At the moment, economists are expecting 125,000 new jobs to be created, with the unemployment rate ticking down to 4.7% from July's reading of 4.8%.

Bottom Line: The interest rate market is technically overbought; we expect a pull-back in the bond market, and thus rates will move higher. However, the technicals will take a back seat to the barrage of reports coming out this week, starting tomorrow.

Jeff Edwards , CS Financial
1-888-887-3100
jeff@edwards-cs.com