Tuesday, October 8, 2013

Government Shutdown Review

This Week In Review: The government shutdown and the debt ceiling issues were front and center as the short- and long-term impacts could be historic.

What's Ahead: Several key reports are scheduled to be released, but the question is whether the shutdown will prevent their release.

This Week

The Jobs Report for September was not reported as normal last week due to the government shut down and could be the first of several key reports delayed.

The government shutdown has had a wide-reaching impact on many people and services across the country. But the looming October 17 deadline for the debt ceiling may come to the forefront.

What is the debt ceiling? The debt limit, currently at $16.7 trillion, is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations.

Why is this significant? Last week, the U.S. Treasury stated that, “In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth—with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression.”

Stay tuned on this important news subject as it will certainly impact the bond market and, therefore, home loan rates, which are tied to mortgage bonds. The uncertainty over these issues halted the recent rally in mortgage bonds.

A glimmer of good news. There was good news from the housing sector last week. Research firm CoreLogic reported that its Home Price Index, including distressed sales, showed a year-over-year increase of 12.4 percent from August 2012 to August 2013. August now marks the eighteenth consecutive month of year-over-year gains.

What's Ahead

The biggest news regarding this week’s economic calendar isn’t when reports are scheduled to be released, but if they will be.

· Economic data doesn't begin until Thursday with the Weekly Initial Jobless Claims report. Will the report be released by the Labor Department if the government is still shutdown?

· On Friday, Retail Sales and the Producer Price Index are set to be released by the Commerce Department and the Labor Department, respectively. Will these reports be released? 

· Also on Friday, Consumer Sentiment will be reported. 

In addition, the minutes from the September 18 meeting of the Federal Open Market Committee will be released. The text will be closely scrutinized, especially regarding when the Fed may taper its bond purchase program known as Quantitative Easing, which has helped keep home loan rates attractive.

 Source: Mortgage Success Source...

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