There are only two economic reports worth watching this week that are likely to affect mortgage rates. Both of them are scheduled for release the same day, meaning we may see a relatively calm week for mortgage rates. The financial markets are closed tomorrow in observance of the President’s Day Holiday and will reopen Tuesday morning. You may find some lenders to be open for business tomorrow, but I would not expect to see new rates issued until Tuesday.
Wednesday morning brings us all of this week’s relevant news and data. The Labor Department will release January’s Consumer Price Index (CPI) at 8:30 AM ET, which measures inflationary pressures at the very important consumer level of the economy. With exception to maybe the Employment report, the CPI is the most important report that we see each month. Its results can have a huge impact on the financial markets, especially long-term securities such as mortgage-related bonds. It is expected to show a 0.1% increase in the overall index and a 0.2% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall.
The second and final relevant economic data of the week is the Leading Economic Indicators (LEI) for January. This Conference Board report attempts to predict economic activity over th e next three to six months. It is expected to show a 0.2% rise, meaning that economic activity may rise in the near future. A smaller than expected increase would be good news for the bond market and mortgage rates.
Also, Wednesday afternoon brings us the release of the minutes from the last FOMC meeting. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading.
Overall, the most important day of the week is obviously Wednesday with the release of all of the week’s relevant news. The rest of the week will likely be fairly quiet, keeping mortgage near Wednesday’s afternoon levels. The recent bond rally has me concerned that traders may sell some holdings to capture the profits from the run in prices. We may see some selling ahead of Wednesday’s data while some traders may wait until after Wednesday’s news. I believe that favora ble news is already built into current bond prices. Accordingly, I have shifted to a lock recommendation for immediate and short-term periods.
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.
a la mode
This week brings us the release of only three monthly economic reports for the bond market to digest. The first report of the week comes late tomorrow morning when the Institute for Supply Management (ISM) will post their manufacturing index for September. This index gives us an indication of manufacturer sentiment. Analysts are expecting a decline from the 54. 5 reading last month to 53.5 this month. The 50.0 benchmark is extremely important because below that level means more surveyed executives felt business worsened than those who said it had improved. This data is important not only because it measures manufacturer sentiment, but it is very recent data. Some economic releases track data that are 30-60 days old, but the ISM index is only a few weeks old. If we get a smaller than expected reading, I expect to see the bond market rally and mortgage rates fall further tomorrow morning.
The next release is Wednesday when the Commerce Department will post August’s Factory Orders data. This manufacturing sector report is similar to last week’s Durable Goods Orders release, but includes orders for non-durable goods. It can usually impact the financial markets enough to change mortgage rates if it varies from forecasts by a wide margin. Current forecasts are calling for a decline in new orders of approximately 0.2%. An unexpecte d rise could drive mortgage rates higher, while a weaker than expected reading should push them lower Wednesday.
The Labor Department will post September’s Employment report early Friday morning. This report will reveal the U.S. unemployment rate, number of new payrolls added and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.
Weaker than expected readings should help boost bond prices and lower mortgage rates Friday. However, stronger then forecasted readings could be disastrous for mortgage pricing. Analysts are expecting to see no change in the unemployment rate of 4.7%, an increase in new payrolls of approximately 120,000 and a 0.3% increase in earnings.
Overall, look for Friday to be the big day of the week, but tomorrow may also bring chang es to mortgage rates. The bond market will close early Friday ahead of the Columbus Day holiday and will reopen Tuesday morning. This may create additional volatility in the markets as investors move to protect themselves over the long weekend.
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.
This week brings us the release of seven economic reports for the bond market to digest. Three of them are considered to be of low importance and likely will have little impact on mortgage rates. With data scheduled for release each day, we may see an active week in the bond and mortgage markets.
The first data of the week comes tomorrow morning with the release of August’s Existing Home Sales report. The National Association of Realtors posts this data, giving us an indication of housing sector strength by tracking home resales in the U.S. It is expected to show a decline from July’s sales, however, this data is not considered to be of high importance to the bond market.
Tuesday’s important report is September’s Consumer Confidence Index (CCI). This Conference Board index will be posted at 10:00 AM and gives us a measurement of consumer willingness to spend. It is expected to show a sizable increase from last month’s reading, indicating that consumers are more likely to make large purchases in the near future. This is bad news for the bond market and mortgage rates. Analysts are calling for a reading of approximately 102.5, up from August’s 99.6. If we see a smaller than expected rise, we should see the bond market move higher and mortgage rates move lower Tuesday.
August’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 in the neighborhood of 0.8%. A larger increase could hurt bond prices and cause mortgage rates to rise Wednesday. However, a smaller than expected increase would indicate a weaker than expected manufacturing sector that should help push mortgage rates lower Wednesday.
Also Wednesday morning will be the release of August’s New Home Sales. It is expected to show that sales of new homes fell in August. Due to the importance of the Durable Goods Orders report and the fact that this data is usually not a major influence on mortgage pricing, I expect this release to be a non-factor in Wednesday’s mortgage rates.
Thursday’s data is the final revision to the 2nd Quarter Gross Domestic Product (GDP). Since this data is aged now and the preliminary reading of the 3rd Quarter GDP will be released next month, I don’t see this revision having much of an impact on the financial markets or mortgage pricing. It is expected to show no change from the previous estimate of a 3.3% annual rate.
There are two reports scheduled for release Friday morning. August’s Personal Income and Outlays and the revised reading to the University of Michigan’s Consumer Sentiment Index for September. The first will be released early morning and gives us an indication of consumer ability to spend and current spending habits. This is important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. It is expected to show a 0 .3% rise in income and a 0.2% increase in spending.
The Michigan index measures consumer confidence and is believed to indicate future consumer spending strength. The preliminary release earlier this month revealed an 84.4 reading. Analysts are expecting to see a small upward revision, bringing the index around the 85.0 level. A lower reading should help improve mortgage rates Friday morning, depending on the results of the income and spending data.
Overall, this will likely be a fairly active week for mortgage rates. The most important day will either be Tuesday or Wednesday due to the importance of the date being posted those days. For the time being, I am shifting back to lock recommendations for the immediate and short-term periods. If this week’s data does indeed show weaker than expected results, I may shift to float across the board. Until we get those assurances, I am concerned that we may see pressure and profit-taking in bonds, possibly lead ing to higher mortgage rates in the immediate future.
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.
a la mode
Wednesday’s bond market has opened fairly strong, continuing yesterday’s afternoon rally. The stock markets are showing small gains with the Dow up 12 points while the Nasdaq has gained 6 points. The bond market is currently up 14/32, which should improve this morning’s mortgage rates by approximately .125 - .250 of a discount point.
There is no relev ant economic news scheduled for release today, leaving the markets to trade off yesterday’s news. The 10-year Note auction was met with a strong demand, leading to afternoon buying in bonds yesterday and this morning. This means that investors have a good appetite for U.S. bonds, which should help prevent mortgage rates from moving much higher in the immediate future.
The next piece of data comes tomorrow morning with the release of August’s Retail Sales report. It will give us a measurement of consumer spending, which is very important to the markets because consumer spending makes up two-thirds of the U.S. economy. Current forecasts call for a 0.2% decline in sales last month after July’s 1.4% jump. If we see a higher level of spending than is forecasted, the bond markets will most likely fall and mortgage rates will rise. However, a weaker than expected reading could push bond prices higher and mortgage rates lower tomorrow.
We will also see weekly unempl oyment claims tomorrow morning, but I am not expecting them to affect mortgage rates. It is expected to show 315,000 new claims were filed last week, but with the sales report coming out at the same time this data should have no impact on bond trading or rates.
If I were considering financing/refinancing a home, I would…. Float 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.
a la mode
