Daily Market Update 10/12/09

I have returned after a much needed week-long vacation to a mortgage-backed securities (MBS) market that is closed in observance of Columbus Day. Mortgage rates finished last week slightly higher following weak demand for Thursday's 30-year Treasury auction and mixed signals from Fed officials regarding the timing of future rate increases. MBS markets were also hurt by solid gains in stock prices. The most significant economic data this week will be Wednesday's report on September Retail Sales and Thursday's Consumer Price Index (CPI). Retail Sales account for about 70% of economic activity and the CPI is the most closely watched monthly inflation report. Minutes from the last FOMC meeting will come out on Wednesday.