This holiday shortened week brings us the release of five important economic reports, three of the five are considered to be of high importance to the bond market and mortgage pricing. The financial and mortgage markets are closed tomorrow in observance of the Memorial Day holiday and will reopen Tuesday morning.

The Conference Board will start the week’s releases by posting their Consumer Confidence Index (CCI) at 10:00 AM Tuesday. This is an extremely important release that measures consumer willingness to spend. If the index rises, it indicates that consumers feel better about their personal financial situations and are more apt to make large purchases. If confidence is sliding, analysts think consumer spending may slow in the near future. The latter is good news for the bond market because it should ease concerns about inflationary pressures, making bonds more attractive to investors. This should boost bond prices and push mortgage rates lower Tuesday morning. It is expected to show a reading of 100.0 after April’s 109.2.

There is no relevant economic news scheduled for release Wednesday, but we will get to see the minutes from the last FOMC meeting. Market participants will be looking for how Fed members voted for the last rate hike. A unanimous vote could mean that all voting members are still concerned about inflation, meaning that more rate hikes may be coming. However, a divided vote will likely be construed as an indication that the rate hikes may stop in the near future. The minutes will be released at 2:00 PM ET, so if there is an market reaction to them it will be evident during afternoon trading.

The revised 1st Quarter Productivity and Costs report will be released Thursday morning. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation and is thought to allow low inflationary economic growth when productivity is high. Last month’s preliminary reading revealed a 3.2% rate, but I don’t think this piece of data will have much of an impact on the bond market or mortgage pricing. Current forecasts are showing an upward revision to 4.2%.

The next report also comes Thursday morning with the release of the Institute for Supply Management’s (ISM) manufacturing index. Th is highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are expecting to see a 55.7 reading in this month’s release, meaning that sentiment slipped during May. A smaller reading will be good news for the bond market and mortgage shoppers while an unexpected increase could lead to higher mortgage rates Thursday.

The week’s most important piece of economic data is also arguably the single most important report that we see each month. The Labor Department will post May’s Employment data early Friday morning. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate remain at 4.7% with approximately 170,000 new jobs added. An increase in unemployment and fewer new jobs than expected would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates Friday.

The Commerce Department will release the last report of the week with April’s Factory Orders data late Friday morning. This manufacturing sector report is similar to last week’s Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn’t expected to cause much change in rates this month. Current forecasts are expecting to see a drop in orders of 1.5%. With the Employment report being released Friday, I don’t see this data having much influence on bond trading or mortgage rates.

Overall, I think we have a busy week ahead of us. With the markets closed tomorrow, Tuesday’s data will set the tone for the first part of the week. The big report of the week is Friday’s Employment data. I wouldn’ t be as concerned with the unemployment rate as with the number of new jobs added. The payroll number has been at the forefront of recent releases and will likely drive all of the financial markets Friday. The most volatility in rates will likely come Thursday or Friday, but Tuesday’s CCI report after a long weekend may also lead to rate changes. With three out of the week’s four trading days possible volatile sessions, please maintain contact with your mortgage professional.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock 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.

Provided by a la mode

 

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