Weekly Rate Lock Advisory – 05/04/2009

This week is very light in terms of the number of economic releases that are scheduled to be posted. However, we may still have an active week in the markets and mortgage rates due to the importance of the data that is being released and the other events on the calendar. There are only two reports scheduled that are worth watching, but one of them is highly important to bonds and mortgage rates.

The first event of the week will be testimony of Fed Chairman Bernanke as he speaks before a Joint Economic Committee Tuesday morning. The topic will be the economy and the Fed’s outlook for future activity. Market participants will be watching his words closely, which means that we will likely see some volatility in trading as he speaks. He will begin at 10:00 AM ET, so look for fluctuations in the markets during late morning trading and potential revisions to rates early afternoon.

The Labor Department will release its 1st Quarter Productivity and Costs data early Thursday morning. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rising, the bond market should react favorably. However, a decrease could cause bond prices to drop and mortgage rates to rise Thursday morning. It is expected to show a 0.9% increase in productivity and a 2.5% increase in the labor costs reading.

Friday brings us the release of the almighty Employment report, giving us April’s employment statistics. This is where we may see a huge rally or major sell-off in the bond market and large changes in mortgage rates. The ideal situation for the bond and mortgage markets would be a larger than expected increase in the unemployment rate and more payrolls lost during the month than was expected.

Just how much of an improvement or worsening in rates depends on how much variance there is between forecasts and actual readings. This could turn out to be a wonderful day in the mortgage market, but it also carries risks of seeing mortgage rates move higher if the Labor Department posts stronger than expected readings. Current forecasts are calling for an 8.9% unemployment rate and approximately 620,000 jobs lost during the month.

In addition to this week’s economic data, we also have Treasury auctions that can influence bond trading and affect mortgage rates. The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:30 PM ET each day. If they were met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding could lead to higher mortgage pricing those afternoons.

Overall, I am expecting to see a fairly active week in mortgage rates. Tomorrow will probably be the lightest day with no relevant data or events scheduled, but expect to see movement in rates multiple days this week. Tuesday’s speech and Friday’s Employment report will heavily influence trading, likely making them the most important days. However, Thursday’s data and Treasury auction may also lead to noticeable changes in rates. Accordingly, I would strongly recommend maintaining contact with your mortgage professional the next few days if still floating an interest rate.

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.

Weekly Rate Lock Advisory – 04/27/2009

This week is packed with relevant economic news in addition to another FOMC meeting. All seven of the reports are considered to be at least moderately important while several are considered very important to the markets and mortgage rates. This makes it likely that we will see plenty of movement in mortgage pricing over the next several days.

The 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 make large purchases in the near future. 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 keep inflation concerns to a minimum. But, a sizable increase could hurt the bond market, pushing mortgage rates higher Tuesday. It is expected to show a reading of 28.8, which would be an increase from March’s 26.0 reading.

Wednesday brings us the release of a very important report along with the FOMC meeting results. The report 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. and is considered to be the best indicator of economic growth or contraction. I expect this report to cause major movement in the financial markets Wednesday and therefore the mortgage market also. Analysts are expecting to see a decline in output at an annual rate of 4.9%. A larger decline would be ideal for mortgage rates. But, a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates Wednesday morning.

This week’s FOMC meeting will begin on Tuesday but will not adjourn until Wednesday afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the 2:15 PM ET post-meeting statement.

The next report of the week is the 1st Quarter Employment Cost Index (ECI) Thursday morning, which tracks employer costs for wages and benefits. This gives us a measurement of wage-inflation. If it shows a large increase, we may see wage 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 0.5%.

March’s Personal Income & Outlays is the second of two reports due to be posted Thursday morning. This data helps us measure consumers’ ability to spend and current spending habits, which is important to the mortgage market due to the influence that consumer spending related information has on the financial markets. If a consumer’s income is rising, they are more likely to make additional purchases. This raises inflation concerns and has a negative impact on the bond market and mortgage rates. Current forecasts are calling for a 0.2% decline in income and a 0.1% drop in spending. The lower the reading, the better the news for bonds for both portions of the report.

There are three reports scheduled for release late Friday morning. The first is the University of Michigan’s update to their Index of Consumer Sentiment for April. This report gives us an indication of consumer sentiment. I don’t expect it to have a significant impact on bonds and mortgage pricing unless it varies greatly from forecasts Current forecasts are calling for a small downward revision to 61.5.

The second is March’s Factory Orders data at 10:00AM. This is a fairly important release because it measures manufacturing sector strength. It is similar to last week’s Durable Goods Orders, except this report includes non-durable goods such as food and clothing. Generally, the market is more concerned with the durable goods orders like refrigerators and electronics than items such as cigarettes and toothpaste. This is why the Durable Goods report usually has more of an impact on the financial markets than the Factory Orders report does. Still, a larger decline than the 0.7% that is expected could push mortgage rates slightly lower, while a smaller drop will likely lead to higher rates. But, the third report of the morning is the most important and will likely be the biggest influence on bond trading Friday.

The Institute for Supply Management (ISM) will post their manufacturing index late Friday morning. This is one of the first important economic reports released each month and gives us an indication of manufacturer sentiment. A reading above 50 means that more surveyed trade executives felt business improved during the month than those who felt it had worsened. This points toward more manufacturing activity and could hurt bond prices, pushing mortgage rates higher. But, if we see a drop from last month’s reading of 36.3, the bond market should thrive and mortgage rates will probably fall. It is expected to show a reading of 38.0.

Overall, look for plenty of movement in the financial markets and mortgage rates this week. Wednesday will likely be the most important day of the week with the GDP being posted along with the FOMC adjournment, but we may see noticeable changes to rates Friday 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… Lock if my closing was taking place between 8 and 20 days… Lock 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.

Weekly Rate Lock Advisory – 04/20/2009

This week is fairly light in terms of economic news scheduled for release. There are four reports scheduled, but only one of them is likely to cause much movement in mortgage rates. Accordingly, there is a fairly decent possibility of seeing a fairly calm week in the mortgage market, assuming that the stock markets do the same.

The week’s first data comes Monday morning when the Conference Board will release their Leading Economic Indicators (LEI) for March. This data attempts to measure economic activity over the next three to six months. If it estimates an increase in activity, the bond market may fall and mortgage rates could rise. If it shows a weaker than expected reading, the bond market may move higher and mortgage rates should improve slightly. This is considered to be a moderately important report, so we may see a slight movement in rates as a result of this report. It is expected to show a decline of 0.3%.

There is no relevant data scheduled for release Tuesday or Wednesday. The National Association of Realtors will post March’s Existing Homes Sales numbers Thursday morning, which are expected to show a drop from February. A similar report to this one and actually the week’s least important data- March’s New Home Sales will be released Friday 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 also be posted Friday morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Current forecasts are calling for a decline of 1.5%. This would be a sign of manufacturing sector weakness that would be good news for bonds, especially if the report shows a larger than expected decline. A stronger level of new orders could lead to stock strength and weakness in bonds, translating into higher mortgage rates Friday.

Overall, look for Friday to be the most important day of the week with the Durable Goods report being posted. The rest of the week will likely be heavily influenced by the stock markets. If the major stock indexes rally, bonds will likely suffer and mortgage rates will move higher. If stocks fall for the week, we could see mortgage rates move lower the next few days.

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.

Weekly Rate Lock Advisory – 04/06/2009

This holiday-shortened week brings us the release of little relevant economic data for the markets to digest. We will, however, see the minutes from the last FOMC meeting and have a couple of Treasury auctions to watch. There is only one monthly economic report on tap this week and is one of the least important reports posted each month.

There is nothing of relevance scheduled for today. There is no relevant news scheduled until Wednesday afternoon when the FOMC minutes will be released. Market participants will be looking at these minutes closely. They give us insight to the Fed’s current thought process and individual Fed member opinions. Any surprises in the 2:00 PM ET release could cause afternoon volatility in the markets Wednesday and possible changes in mortgage pricing.

The two Treasury auctions are scheduled for Tuesday and Thursday. There is a 10-year Treasury Inflation Protected Security (TIPS) sale Tuesday and a regular 10-year Note sale Thursday. We could see some weakness in bonds ahead of the sales as investing firms sell current holdings to prepare for them. This weakness is usually only temporary if the sales are met with a decent demand. The results of the auctions will be posted at 1:00 PM ET each day. If the demand from investors was strong, the bond market could rally during afternoon trading, leading to lower mortgage rates. If the sales were met with a poor demand, the afternoon weakness may cause upward revisions to mortgage pricing Tuesday and/or Thursday afternoon.

The only piece of monthly data is February’s Goods and Service Trade Balance report Thursday morning. This data gives us the size of the U.S. trade deficit, but unless it varies greatly from forecasts, it likely will not cause much movement in mortgage rates.

Overall, I am proceeding into this week very cautiously. There are several variables that could make this week very quiet or quite rocky for mortgage shoppers. Wednesday’s FOMC minutes could very well be a major market mover or a complete non-factor. The same goes for Thursday’s auction (Tuesday’s sale will probably have less influence on the markets than Thursday’s). In addition, the bond market will close early Thursday and remain closed until Monday in observance of the Good Friday holiday. This could lead to some additional volatility as traders look to protect themselves over the long weekend.

In other words, we may have a very calm week ahead of us, or we may see rates move noticeably several days. With no important economic data to drive trading and mortgage rates, bonds may move with stocks. This means large stock gains could lead to bond selling and higher mortgage rates. But stock weakness could lead to mortgage pricing improving for the week. Regardless, a lack of economic data is not reason to let our guard down if still floating an interest rate. Watch the market closely and proceed cautiously if not locked yet.

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.