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In the News 
Last week we saw rates move significantly but ended the week with rates essentially unchanged. The week's data began on Tuesday with Retail Sales, which came in better than expected but interest in bonds remained strong as prices seemed to be correcting themselves after selling off the previous week. Wednesday saw big volatility. Tim Geithner spoke before the Senate about China and their slow currency appreciation and Japan weighed in on their potential Yen intervention. Fears surrounding these topics seemed to influence both bond and stock prices.
Thursday was pretty flat as jobless claims were surprisingly down. Producer-level inflation was tame but was slightly above expectations. Friday saw consumer price data come in essentially in line, while consumer sentiment was lower than the consensus. Poor economic conditions around the globe continue to contribute to a rate-friendly market environment. Until employment improves and/or we see rampant inflation pressure rates almost have to stay low.
This week we have a shorter economic calendar. On Tuesday we'll see housing starts, building permits, and a Federal Open Market Committee (FOMC) announcement. Housing data has been volatile lately, as the expiration of tax credits has manipulated the natural cycle of home buying. This week is full of housing data, so watch for a clearer picture of the state of residential real estate activity. The FOMC announcement is always a highly anticipated event. Even though there is no chance that the Fed will raise the funds rate, we need to watch their statement for changes in language and tone. The Fed is extremely careful and deliberate in their wording of this announcement. Any small changes compared to last month's text will be noticed, dissected, and acted upon.
On Wednesday no economic data will be released. On Thursday we will see initial jobless claims, as always. We also have existing home sales and leading indicators on the board. There will be a Treasury announcement on Thursday as well, in which the U.S. Treasury will outline its needs for funding via next week's auctions. Durable goods orders and new home sales data will round out the week on Friday. Durable goods orders are a great indicator of business activity and business investment. Any noise here should be watched closely. New home sales will complete the trifecta of housing construction (starts and permits), sales of existing homes, and sales of newly built homes. As usual, when the data suggests improving economic conditions, increased business activity, and/or healthier home-buying, MBS prices are likely to falter, sending rates higher. On the other hand, data showing slowing growth, decreased business activity, and/or worsening in the housing sector is likely to help MBS prices, allowing rates to go lower.
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