This Week - Market Update

After a big increase in interest rates last week the market will have supply to contend with. Treasury will conduct its quarterly refunding beginning Tuesday with $32B of 3yr notes, Wednesday $24B of new 10 yr notes and Thursday $16B of new 30 yr bonds. After the 10 yr not increased 29 basis points in yield and the 30 yr bond up 14 basis points the auctions should see good demand. This week doesn't provide much data, in fact only weekly jobless claims that carry any significance.
 
The bond and mortgage markets have solidly broken out of their long tight ranges to higher rates. The 10 yr note appears to have a clear path to 3.75% while mortgage rates are likely to increase another 10 to 15 basis points in rate. Concerns of higher interest rates in Europe, China and the rest of the BRICs as well as improving economic conditions will keep US rates from falling with the most likely path being up for rates. One key thing to keep in mind, US rates remain as low as we have had for generations. If lenders don't see it as a positive consumers certainly won't.