Steve de Myer

There are only three pieces of relevant economic data scheduled for release this week that may affect mortgage rates, in addition to two important Treasury auctions. The two most important reports will be posted Friday, meaning the markets will have to rely on factors other than economic news for direction most of the week. There is no relevant economic data due until Thursday, so expect the stock markets to be a big influence on bond trading and mortgage rates until then.

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 1:00 PM ET each day. If they are 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 in the sale, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing those afternoons.

March’s Goods and Services Trade Balance report will be released early Thursday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $49.9 billion trade deficit, but it is the least important of this week’s data and likely will have little influence on Thursday’s mortgage rates.

Friday has the remaining two reports. April’s Producer Price Index (PPI) is the first at 8:30 AM ET. It helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond market rally. The overall index is expected to show no change, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.2%. A decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds.

The last report of the week is May’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident of their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 76.2, which would be a small decline from last month’s final reading. If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower because waning confidence means consumers are less apt to make a large purchase in the near future. That is assuming the PPI does not give us a significant surprise though. The PPI is much more important to the bond market than the sentiment index is, so look for it to be the biggest influence on Friday’s mortgage pricing.

Overall, it likely will be a moderately active week for mortgage rates. Besides the week’s economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Friday with the PPI report on the agenda, but Wednesday’s 10-year Note auction could also heavily sway bond trading. It appears we will likely see the most movement in mortgage rates the latter part of the week unless the stock markets post sizable gains or losses the first part.

This week is extremely active with six relevant economic reports in addition to another FOMC meeting and two fairly important Treasury auctions. The economic reports range from low importance to extremely high importance with the majority of them falling between. There is something of relevance scheduled each day of the week except tomorrow. Therefore, it is likely that we will see a fair amount of movement in mortgage pricing over the next several days.

The Conference Board will kick off the week’s events by posting April’s Consumer Confidence Index (CCI) late Tuesday morning. This 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 savings, 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 and economic growth 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 69.5, which would be a decline from March’s 70.2 reading. The lower the reading, the better the news for mortgage rates.

March’s New Home Sales will also be released late Tuesday morning. It gives us an indication of housing sector strength and mortgage credit demand, but is the week’s least important report. Unless it varies greatly from analysts’ forecasts, I am not expecting the data to cause much movement in mortgage rates. Analysts are currently forecasting an increase in sales of newly constructed homes.

Wednesday morning’s data is March’s Durable Goods Orders that will be released at 8:30 AM ET. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products that are expected to last three or more years, such as appliances and electronics. Current forecasts are calling for a decline in new orders of 1.9%. This would be a sign of manufacturing sector contraction, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A much larger decline would be considered good news for bonds and mortgage pricing, while a large increase would indicate manufacturing sector strength. A sign of solid manufacturing growth could lead to higher mortgage rates Wednesday.

This week’s FOMC meeting will begin 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 12:30 PM ET post-meeting statement. If the statement gives any hint of change in their current forecasts when they expect to adjust key short-term interest rates, we could see a sizable change to mortgage rates Wednesday afternoon.

In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours.

The week does not close quietly with three reports scheduled for Friday morning. 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. and is considered to be the best measure of economic growth or contraction. I expect this report to cause sizable movement in the financial markets Friday and therefore the mortgage market also. Analysts are expecting it to show that the economy grew at an annual rate of 2.6%, which would be a slower pace than the final quarter of last year. A smaller increase would be considered good news 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 Friday morning.

The second report of the day is the 1st Quarter Employment Cost Index (ECI), 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%.

The last piece of a data 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 little change from the preliminary reading of 75.7. This means that surveyed consumers were just as optimistic about their own financial situations as they were earlier this month.

Overall, look for plenty of movement in the financial markets and mortgage rates several days this week. Wednesday will likely be the most important day of the week with the FOMC meeting, press conference and fairly important Durable Goods data, but we may also see noticeable changes to rates Friday after the GDP is posted. If this week’s reports reveal weaker than expected economic conditions, the bond market could extend its rally and mortgage rates should fall for the week. However, I recommend taking a cautious approach towards rates if still floating an interest rate and closing in the near future.

This week brings us the release of five economic reports that are relevant to mortgage rates, in addition to a couple of Treasury auctions that have the potential to be influential on the bond market and mortgage pricing. Corporate earnings season also kicks off this week, which could be instrumental in driving stock prices lower or recover last week’s losses. I still believe stocks are overpriced and are due to pullback sooner or later. This week could be the sooner if some of those key earnings miss analysts’ predictions.

There is no relevant economic news scheduled for release tomorrow. Tomorrow is likely going to be an active day though despite the lack of factual economic data. This is due to the fact that the stock markets were closed Friday in observance of the Good Friday holiday, so they have not been able to react to March’s Employment Report that was posted early Friday morning. The bond market rallied into its early close, pushing mortgage rates noticeably lower. Theoretically, stocks should be in negative ground tomorrow because the number of new jobs added to the economy last month was half of what we saw in February and well below forecasts. That throws into question whether the employment sector can continue to strengthen at the pace we saw the past couple of months, which has helped buoy the major stock indexes.

Also worth noting is the fact that the Dow closed Thursday at 13,060, just a moderate day of selling away from falling below 13,000. That could very well come tomorrow if the major stock indexes react as they are expected to when they open for the first time since the Employment report was posted. Generally speaking, bond weakness is good news for bonds and mortgage rates because investors often shift funds into bonds as a safe-haven from the selling. Data that is good for the economy often boosts stocks and hurts bonds, while weaker economic conditions have an opposite effect on both. Therefore, stock weakness tomorrow could mean another day of strength in bonds and improvements to mortgage rates.

The first report of the week comes Wednesday afternoon when the Federal Reserve will post its Fed Beige Book report at 2:00 PM ET. This report is named simply after the color of its cover and details economic conditions throughout the U.S. by Federal Reserve region. Since the Fed relies heavily on the contents of this report during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any significant surprises. Unexpected signs of strong economic growth or rising inflation would be considered negative for bonds and mortgage rates. Slowing economic conditions with little sign of inflationary pressures would be considered favorable for bonds and mortgage pricing.

The two Treasury auctions are scheduled for Wednesday and Thursday. There is a 10-year Treasury Note sale Wednesday and a 30-year Bond sale Thursday. We could see some weakness in bonds ahead of the sales as participating 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 Wednesday and/or Thursday afternoon.

Thursday begins the highly important economic data when the Labor Department will post March’s Producer Price Index (PPI) at 8:30 AM ET. It will give us an important measurement of inflationary pressures at the producer level of the economy. There are two portions of the report that analysts watch- the overall reading and the core data reading. The core data is more important to market participants because it excludes more volatile food and energy prices. If it shows rapidly rising prices, inflation fears may hurt bond prices since it erodes the value of a bond’s future fixed interest payments, leading to higher mortgage rates. A slight increase, or better yet a decline in prices, would be good news for the bond market and mortgage rates. Current forecasts are calling for a 0.3% increase in the overall reading and a 0.2% rise in the core data.

February’s Goods and service Trade Balance will be released early Thursday morning also. It will give us the size of the U.S. trade deficit, but is not considered to be of high importance to the markets or mortgage rates. This report usually has little impact on mortgage rates unless it shows a significant variance from forecasts and there is no other data to drive trading that day. It is expected to show a trade deficit of $52.0 billion, but since the PPI is also being release Thursday morning, regardless of its results, I doubt this data will have an impact on mortgage rates.

The remaining economic reports will both be posted Friday morning. This first will be March’s Consumer Price Index (CPI) at 8:30 AM ET. This index is one of the most important pieces of data we see each month. It is similar to Thursday’s PPI but measures inflationary pressures at the consumer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors, leading to bond selling and higher mortgage rates. As with the PPI, there are two readings in the index that traders watch. Analysts are expecting to see a 0.3% increase in the overall readings and a 0.2% rise in the core reading. If we see larger increases, we could get higher mortgage rates Friday.

The final release of the week is the University of Michigan’s Index of Consumer Sentiment at 9:55 AM ET Friday. Their consumer sentiment index will give us an indication of consumer confidence, which hints at consumers’ willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial situations, they probably will delay making that large purchase. This influences future consumer spending data and can have a moderate impact on the financial markets. Good news would be a sizable decline from March’s 76.2 reading. Current forecasts are calling for a reading of approximately 71.1.

Overall, look for the most movement in rates the latter part of the week, with exception to maybe tomorrow’s early pricing. The PPI and CPI reports are the biggest names on the agenda. Either of them can cause significant movement in the markets and mortgage rates, so either Thursday or Friday will probably be the most active day of the week. Look for the stock markets to influence bond trading and mortgage rates the first part of the week, but we can expect to see the most movement in rates the latter part. I am expecting it to be an active week for the mortgage market, so please maintain contact with your mortgage professional if still floating an interest rate.

Tomorrow morning has two pieces of economic data scheduled for release at 8:30 AM ET, but neither is considered to be highly important. The first is Employee Productivity and Costs data for the 4th quarter that tracks worker productivity. Higher levels of productivity allows the economy to growth with little inflation concern. It can cause some movement in the bond market, but should have a minimal impact on mortgage pricing. If it varies greatly from analysts’ forecasts of a 0.7% increase, we may see some movement in mortgage rates. However, the markets will be much more interested in Friday’s data, so a slight difference shouldn’t cause a noticeable move in rates.

Also tomorrow, the Labor Department will give us last week’s unemployment figures. They are expected to say that 375,000 new claims for unemployment benefits were filed last week, which would be a slight change from the previous week. Since this data tracks only a single week’s worth of new claims, it usually takes a large and unexpected change for it to affect mortgage rates. However, with the monthly report coming Friday morning, a surprise number could cause more of a reaction than usual.

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.

This week brings us the release of four pieces of economic data to digest along with two important Treasury auctions. None of them are scheduled for tomorrow or Tuesday, meaning all of the week’s events will come over two and a half days. Until we get to the week’s first relevant event Wednesday afternoon, look for the stock markets to be a major contributor to movements in bond prices and mortgage rates. Stock strength will likely equate into bond weakness and higher mortgage rates, and vice versa if stocks fall.

The first relevant report of the week is the Federal Reserve’s Beige Book report at 2:00 PM ET Wednesday. This report, which is named simply after the color of its cover, 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, particularly regarding inflation, unemployment or future hiring.

The two important Treasury auctions will be held Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication for demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would result in upward revisions to mortgage rates.

Thursday has December’s Retail Sales data scheduled, which is the most important report of the week and one of the more watched releases we get each month. This Commerce Department report measures consumer spending by tracking sales at retail establishments in the U.S. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts are calling for an increase in sales of approximately 0.4%. A smaller than expected increase in sales would indicate consumers did not spend as much as thought over the holiday season, helping to prevent rapid economic growth. That would be considered good news for the bond market and mortgage rates.

The last two reports will be posted Friday morning. The first is November’s Goods and Services Trade Balance at 8:30 AM ET. It the week’s least important data and probably will not influence mortgage rates. It measures the size of the U.S. trade deficit and is expected to show a $44.3 billion trade deficit. This data usually does not directly affect mortgage rates, but it does influence the value of the U.S. dollar versus other currencies. A stronger dollar makes U.S. securities more attractive to international investors because they are worth more when sold and converted to the investor’s domestic currency. But unless we see a significant variance from forecasts, I don’t believe this data will lead to a change in mortgage rates Friday.

Overall, Thursday will likely turn out to be the most important day of the week due to the Retail Sales report but Wednesday’s Beige Book and 10-year Note auction may also cause some volatility in the markets. However, any day can become active if the stock markets show significant gains or losses. Therefore, I strongly recommend maintaining contact with your mortgage professional this week, especially the latter part if still floating an interest rate.