This Week’s Bond Market News

This week brings us the release of several very important pieces of economic news. There are a total of eights reports due to be posted this week, with all but a two of them considered to be of high importance to the bond market and mortgage rates. This makes it likely that we will see plenty of movement in mortgage pricing over the next several days.

Th e first report comes late Tuesday morning when the Consumer Confidence Index (CCI) for April will be released. This Conference Board index is a key indicator of future spending by consumers. The group surveys 5000 consumers from across the country about their personal financial situations. If sentiment is strong or rising, it is believed that consumers are more apt to continue to spend. However, if they are concerned about issues such as job security and investments, they will probably delay making large purchases. The latter is better for the bond market and mortgage rates because the expected slowdown in spending would ease inflation concerns. But, a sizable increase could hurt the bond market, pushing mortgage rates higher Tuesday. It is expected to show a reading of 106, which would be a decline from March’s 107.2 reading.

The next piece of data is one of the week’s least important. Also late Tuesday morning, the National Association of Realtors will post March’s Existing Homes Sales numbers, which are expected to show a drop from February. A similar report to this one- March’s New Home Sales will be released Wednesday morning. Both of these releases give us an indication of housing sector strength and mortgage credit demand, but unless they vary greatly from analysts forecasts, I don’t think they will cause much movement in mortgage rates.

March’s Durable Goods Orders will be posted early Wednesday morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Current forecasts call for an increase in orders of approximately 1.6%. A smaller increase could help boost bond prices and cause mortgage rates to drop Wednesday morning. However, a stronger than expected reading would indicate that the manufacturing sector is gaining strength quicker than many had thought. This would be negative news and would probably help drive mortgage rates h igher.

The Federal Reserve will post its Fed Beige Book report at 2:00 PM ET Wednesday. This data details economic conditions throughout the U.S. by region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises.

Friday brings us the release of three important reports. The first is the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. It is considered to be the best indicator of economic growth or contraction. I expect this report to cause major movement in the financial markets Friday and therefore the mortgage market also. Analysts are expecting to see output at an annual rate of 2.8%. A considerably smaller jump would be ideal for mortgage rates. But, a la rger increase would almost certainly cause inflation concerns in the bond market that would push mortgage rates sharply higher Friday morning.

The next report of the day is 1st Quarter Employment Cost Index (ECI), which tracks employer costs for wages and benefits- giving us a measurement of wage-inflation. If it shows a large increase, we may see inflation concerns cause the bond market to fall and mortgage rates to rise. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.9%.

The last important data of the week is the University of Michigan’s update to their Index of Consumer Sentiment for April. This report should cause a similar reaction in the financial and mortgage markets as Tuesday’s CCI does. Current forecasts are calling for a small downward revision to this month’s preliminary reading of 89.2.

Overall, look for plenty of movement in the financ ial markets and mortgage rates this week. Friday is the most important day of the week with the GDP and ECI reports due to be posted, but we may see significant changes to rates Tuesday or Wednesday also. If this week’s reports reveal weaker than expected economic conditions, the bond market should rally and mortgage rates should fall significantly for the week.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.