Mortgage Backed Securities slipped roughly .25bp (FNMA 30 YR 4.5%) today which translates into 1/8 decline in Consumer July 2009 Mortgage Rates. The small movement can be attributed the triple digit move in the DOW thanks to Financials.

This week, rates should be in flux with traders watching 3 things.

The first is Earnings Season reports.

Big Banks JP Morgan Chase, Bank of America and Citigroup report quarterly earnings this week.  If balance sheets look healthy and markets are encouraged by the results, it could spark a stock market surge, similar to last quarter.  This would be bad for mortgage rates.

The second item markets will be watching is economic data.  In addition to inflation-related data like the Consumer Price Index, markets are watching for Tuesday’s Retail Sales report.

Retail sales are a key economic indicator because consumer spending accounts for two-thirds of the economy.  If the data is weak, mortgage rates should benefit.

And, lastly, markets are awaiting the Wednesday release of last month’s Federal Open Market Committee meeting minutes.

The minutes will give a behind-the-scenes look at the conversation and debate surrounding the Fed’s decision to hold the Fed Funds Rate near 0.000 percent and not purchase additional treasury securities on the open market.

Mortgage rates remain volatile.  Therefore, if you’re actively shopping for a mortgage rate, consider that mortgage rates have been falling for the past 3 weeks and may be due for a reversal.  All it would take for that to happen is for this week’s economic data to show just a little bit of strength.

We could expect traders to pile back into stocks and mortgage rates to suffer.

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