Weekly Mortgage Commentary-April 14, 2014

This week brings us the release of five economic reports that have the potential to affect mortgage rates. We also have round two of corporate earnings releases that can significantly impact the stock markets and help direct funds into or away from bonds. Strong earnings reports should fuel a stock rally that pressures bonds and leads to higher mortgage rates. On the other hand, disappointing earnings news should make bonds more attractive and lead to rate improvements.

 

The Commerce Department will start this week’s activities with the release of March’s Retail Sales data early Monday morning. This piece of data gives us a measurement of consumer spending levels, which is very important because consumer spending makes up over two-thirds of the U.S. economy. Forecasts are calling for 1.0% increase in sales from February to March. If we see a larger increase in spending, the bond market will likely fall and mortgage rates will rise as it would indicate consumers are spending more than thought, fueling economic growth. However, a weaker than expected level of sales could push bond prices higher and mortgage rates lower Monday.

March’s Consumer Price Index (CPI) is the second report of the week, coming at 8:30 AM ET Tuesday. This index is one of the more important pieces of data the bond market gets each month. It is similar to last week’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. There are two readings in the index that traders watch- the overall and the core data that excludes more volatile food and energy prices. Analysts are expecting to see a 0.1% rise in the overall readings and a 0.1% increase in the core reading. The core data is the more important reading, which ideally would show a decline in prices at the consumer level, keeping inflation concerns subdued.

Wednesday has three pieces of economic data worth watching. The first of the day is March’s Housing Starts report that tracks groundbreakings of new home construction. It gives us a measurement of housing sector strength and future demand for mortgage credit. It is not considered to be highly important to the markets but does draw enough attention to influence trading if it reveals surprisingly strong or weak numbers. The report will be posted at 8:30 AM ET and is expected to show an increase in starts from February to March. Good news for mortgage rates would be a decline in starts that points toward housing sector weakness.

The second report Wednesday will be March’s Industrial Production data at 9:15 AM ET. It tracks output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Current forecasts are calling for an increase in production of 0.5%. This data is considered to be only moderately important to rates, so it will take more than just a slight variance to influence bond trading and mortgage pricing. Signs of manufacturing sector strength are considered negative news for mortgage rates, so a decline in output would be favorable news for the bond market and mortgage shoppers.

Also Wednesday is afternoon release of the Federal Reserve’s Fed Beige Book report. This report is named simply after the color of its cover but details economic conditions throughout the U.S. by Fed 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. Generally speaking, signs of strong economic growth or inflation rising form the last update would be considered negative for bonds and mortgage rates. Slowing economic conditions with little sign of inflationary pressures would be ideal for mortgage rates.

That concludes the week’s monthly or quarterly economic reports that are likely to affect mortgage rates. The bond market will close early Thursday and will be closed Friday in observance of the Good Friday holiday. The stock markets will be closed Friday but have a full day of trading Thursday. All the markets will reopen for regular trading Monday morning. It is fairly common to see a little pressure in bonds just before a holiday as investors look to protect themselves over the long weekend.

Overall, the most important reports are Monday’s Retail Sales and Tuesday’s CPI index, but Wednesday has three releases so it may be an active day also. I believe we will see the most movement in mortgage rates either Monday or Wednesday. However, we need to keep a close eye on the stock markets for mortgage rate direction also. If stocks extend last week’s sell-off, we could see further gains in bonds and improvements to mortgage rates. The benchmark 10-year Treasury yield is currently almost 2.62%, which is well below the 2.68% we considered a resistance level. I don’t see it remaining where it is now for very long. I believe we are more likely to see it move back closer to that threshold than below 2.60% in the immediate future. Therefore, I am holding my conservative stance towards rates and recommend locking a rate if closing in the near future.

Weekly Morgage Commentary-April 7, 2014

This week brings us the release of only two monthly economic reports that are relevant to mortgage rates, in addition to a couple of Treasury auctions and the minutes from the last FOMC meeting 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 significantly higher or lower. Since stock movement often affects bond trading, we will also be watching the earnings releases from some of the bigger names and bellwethers to help gauge bond direction and mortgage rates movement. There is no relevant economic news scheduled for release Monday or Tuesday. The first events of the week will come Wednesday afternoon. One is the release of the minutes from the last FOMC meeting. Market participants will be looking at them closely as 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, particularly about inflation, economic conditions or their current bond buying program, could cause afternoon volatility in the markets Wednesday and possible changes in 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. Friday has both of the week’s important economic data scheduled. The Labor Department will start the day by posting 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 good size decline in prices would be good news for the bond market and mortgage rates. Current forecasts are calling for a 0.1% increase in the overall reading and a 0.1% rise in the core data. The only other monthly release of the week worth watching 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 or employment situations, they probably will delay making that 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 80.0 reading. Current forecasts are calling for a reading of approximately 81.0. Overall, look for the most movement in rates the latter part of the week. I don’t believe Friday’s rally in bonds will necessarily carry into Monday’s trading, so any gains to open the week will likely be a result of stock losses that help shift funds into bonds. Wednesday could be the most active day of the week if the FOMC minutes reveal any surprises. If not, the best bet would be Friday. Tuesday appears to be the lightest and will probably be the calmest day for mortgage rates. Look for the stock markets to also influence bond trading and mortgage rates a good part of the week as traders react to the corporate earnings news. 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.

Weekly Mortgage Commentary-March 10, 2014

This week brings us the release of only three relevant economic reports along with two Treasury auctions for the markets to digest. Two of the three reports are considered highly important, so we could see a fair amount of movement in rates again the latter part of the week. There is nothing of relevance to mortgage rates being released or taking place Monday or Tuesday, so all of the week’s events are scheduled over three days.

 

The first thing on the calendar will come Wednesday afternoon. There are two Treasury auctions this week that could potentially affect mortgage rates. The first is the 10-year Treasury Note auction Wednesday and the 30-year bond sale will be held Thursday. Results of both sales will be posted at 1:00 PM ET on the sale days. If investor demand was high, we may see bonds rally during afternoon trading as it would hint that investors still have an appetite for longer-term securities. However, weak demand in the sales could lead to selling and an increase in mortgage rates late Wednesday and/or Thursday.

February’s Retail Sales data will come from the Commerce Department early Thursday morning. This data is extremely important to the financial markets because it measures consumer spending strength. Since consumer spending makes up over two-thirds of the U.S. economy, data that is related usually has a big impact on the markets. This month’s report is expected to show an increase in sales of approximately 0.2%. If it reveals a larger than expected increase, the bond market will likely fall and mortgage rates will move higher as it would indicate a stronger level of economic growth than many had thought. If it reveals a much weaker level of spending, I expect to see bond prices rise and mortgage rates improve Thursday morning.

The Labor Department will post February’s Producer Price Index (PPI) early Friday morning. This important index measures inflationary pressures at the producer level of the economy. There are two portions of the index- the overall reading and the core data. The core data is more important and watched more closely because it excludes more volatile food and energy (including gasoline) prices. If the index shows a large increase, inflation concerns will rise, making long-term investments such as mortgage-related bonds less attractive to investors. This would lead to higher mortgage rates Friday morning. Current forecasts are calling for a 0.2% increase in the overall reading and a 0.1% increase in the core data.

Also Friday is the University of Michigan’s Index of Consumer Sentiment for March just before 10:00 AM ET. This index gives us a measurement of consumer willingness to spend. If consumers are more confident in their own financial and employment situations, then they are more apt to make large purchases in the near future. This helps fuel consumer spending levels and economic growth. A drop in confidence will probably hurt the stock markets and boost bond prices, leading to lower mortgage rates if the PPI matches forecasts. Bad news for bonds and mortgage rates would be rising confidence. It is expected to show a reading of 82.0, which would be a small increase from February’s final reading 81.6.

Overall, I would label Thursday as the most important day of the week, but Friday is also likely to be active for mortgage rates. Stocks rallied last week, helping to drive bond yields and mortgage rates higher. The yield on the benchmark 10-year Treasury Note closed the week at 2.79%. This is troublesome for mortgage borrowers because rates tend to follow bond yields. This coming week will tell us a lot about which direction bond yields and mortgage pricing will be headed in the near future. It will be interesting to see if it moves closer to 2.95% or back toward 2.70%. I suspect it is going to move higher before moving much lower, so please be careful if still floating an interest rate and closing soon.

Weekly Mortgage Commentary-March 3, 2014

This week has seven relevant reports for the markets to digest with two being considered highly important. The rest of the reports are moderate to fairly important to the markets, meaning they have the potential to affect mortgage rates but usually don’t cause a noticeable change. The most important data comes early and late in the week, but sizable moves in stocks can impact bond trading and mortgage rates any day.

January’s Personal Income and Outlays data will start the week’s activities at 8:30 AM ET Monday morning. This data gives us an indication of consumer ability to spend and current spending habits. Current forecasts call for an increase in income of 0.3% while spending is expected to rise 0.1%. Lower levels of income means consumers have less money to spend. And weaker levels of consumer spending helps limit overall economic growth, making long-term securities such as mortgage-related bonds more attractive to investors. Therefore, the weaker the readings, the better the news it would be for mortgage rates.

The Institute for Supply Management (ISM) will release their manufacturing index for February late Monday morning. This index measures manufacturer sentiment and can have a pretty large impact on the financial and mortgage markets if it varies from forecasts. It is expected to show a small increase from January’s 51.3 to 51.6 this month. This is important because a reading above 50.0 means more surveyed manufacturers felt business improved during the month than those who felt it had worsened, meaning growth is likely in the manufacturing sector. If we see a weaker than expected reading, the bond market could rally. This is especially true if we see a reading below 50.0 that would point towards manufacturing sector contraction. But, a much higher than forecasted reading could lead to major selling in bonds, causing mortgage rates to rise Monday morning. One of the reasons this data is considered so important is the fact that it is usually the first monthly report posted that covers the preceding month. It is traditionally posted the first business day of the month, allowing for a current snapshot of conditions in the manufacturing sector.

This week has a couple of private sector employment-related reports due to be posted. The biggest one comes Wednesday morning from payroll processor ADP who will announce their change in private-sector payrolls processed last month. Since it is not a government agency report, it isn’t considered to be highly important however, as with any employment-related data it does draw some attention. This is especially true for this report because it is posted just a couple days before monthly employment figures are released by the Labor Department. I personally believe it is given more attention than it really deserves, particularly because many use it to predict the monthly government figures but often fail miserably. Still, if it shows a noticeable variance from expectations, it will likely cause movement in the markets and mortgage rates.

The Fed Beige Book is the next report scheduled for release and it will be posted Wednesday afternoon. This report details economic activity throughout the country by Federal Reserve region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trading Wednesday. It probably will not cause a major sell off in the stock or bond markets, but it is still worth watching it.

Thursday has two reports scheduled for release, but neither is considered to be highly important. The first is the revised Productivity index for the 4th Quarter of last year. The preliminary reading posted last month showed an increase of 3.2% in worker output. Analysts are expecting to see a downward revision of 0.7% to last month’s initial reading. Employee productivity is watched fairly closely because a higher level of output per hour is believed to mean that the economy can expand without inflation concerns. However, since this data is quite aged now, it likely will have little impact on Thursday’s mortgage rates unless it shows a significant change.

The second report of the day is January’s Factory Orders at 10:00 AM ET, which will give us a measurement of manufacturing sector strength. This data is similar to last week’s Durable Goods, except this report covers orders for both durable and non-durable goods. Current forecasts are calling for a drop in new orders of approximately 0.5%. A larger than expected drop would be good news for the bond market and could lead to an improvement in mortgage rates since it would point towards economic weakness.

The biggest news of the week comes early Friday morning when one of the single most important monthly reports we see will be posted. The Labor Department will release February’s Employment report at 8:30 AM ET Friday. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller increase in payrolls than expected and little or no increase in earnings. Current forecasts are calling for no change in the unemployment rate of 6.6% and approximately 155,000 new jobs added to the economy. Stronger than expected readings will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would raise concerns about the economy’s ability to continue to grow that would have an opposite impact on the markets and mortgage pricing.

January’s Goods and Services Trade Balance report will also be released at 8:30 AM ET Friday morning, but it will likely draw little interest from market participants. It will give us the size of the U.S. trade deficit, which does not directly impact mortgage rates and is the week’s least important piece of news. Current forecasts are calling for a $37.3 billion trade deficit during January, but with it being posted at the same time as the almighty employment report, there is little possibility of this report affecting Friday’s mortgage rates.

Overall, look for a fairly active week in the markets and mortgage rates, especially the early and latter days. Friday is the most important day of the week due to the significance of that day’s data but we could also see a noticeable move in rates Monday. The lightest day will probably be Tuesday unless something unexpected happens. With data or relevant reports being posted four of five days and some of that data considered key, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing soon.

Weekly Mortgage Commentary-February 24, 2014

This week brings us the release of five economic reports to be concerned with in addition to testimony from Fed Chairman Yellen and two potentially relevant Treasury auctions. None of the reports can be considered key or highly important to the markets, but a couple of them certainly carry enough significance to affect mortgage pricing. There is something scheduled four of the five days that can move rates, with Monday being the sole empty day of the week.

 

The first piece of data is February’s Consumer Confidence Index (CCI) at 10:00 AM ET Tuesday morning. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. If consumers are feeling good about their own financial and employment situations, they are more apt to make large purchases in the near future. Since consumer spending makes up over two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show little change in confidence from the 80.7 reading in January to 80.8 this month. A lower reading would be considered good news for bonds and mortgage rates since it would indicate consumers are less likely to make a large purchase in the near future.

January’s New Home Sales report will be posted at 10:00 AM ET Wednesday morning. This is the least important report of the week, and is the sister report to last week’s Existing Home Sales data. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates unless they show significant surprises. Wednesday’s report is expected to show a decline in sales of newly constructed homes, hinting at weakness in the new home portion of the housing sector. Ideally, the bond market would prefer to see noticeable housing sector weakness because it makes broader economic growth more difficult and bonds tend to thrive during weaker economic conditions.

January’s Durable Goods Orders data will be released at 8:30 AM ET Thursday morning. This report gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. Products such as electronics, refrigerators, airplanes and autos are examples of these big-ticket items. A larger decline than the 1.1% that is expected would be good news for the bond market and mortgage rates as it would point towards manufacturing sector weakness. This data is known to be quite volatile from month-to-month, so large swings are fairly normal. A small variance from forecasts would not cause much concern or joy in the markets.

Fed Chairman Yellen will deliver day two of the Fed’s semi-annual testimony on the status of the economy and monetary policy late Thursday morning. She will be speaking to the Senate Banking Committee, which was postponed from its originally scheduled date two weeks ago due to weather. Day one in front of the House Financial Services Committee was completed. Since the prepared statement by Chairman Yellen is expected to mirror her previous appearance, any noticeable reaction in the financial or mortgage markets will likely come as a result of a response during the Q&A portion of the proceeding. She will appear at 10:00 AM ET Thursday, so any reaction will probably come during late morning trading.

Friday has the remaining two relevant pieces of economic data. The first of two revisions to the 4th Quarter GDP reading is scheduled for release at 8:30 AM ET Friday morning. The GDP is considered the benchmark reading of economic growth or contraction because it is the total sum of all goods and services produced in the U.S. Analysts’ forecasts currently call for an annual rate of growth of 2.6%, down from the initial estimate of 3.2% that was posted last month. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market, while a downward revision would be good news for bonds and could lead to improvements in mortgage pricing Friday.

The University of Michigan’s revision to their Index of Consumer Sentiment for February will close out the week’s calendar just before 10:00 AM ET Friday. Current forecasts show this index rising slightly from its preliminary estimate of 81.2. This index is fairly important because it helps us measure consumer confidence that translates into consumer willingness to spend, but is not considered to be a major market mover. This means it will probably not have a significant impact on mortgage rates, especially with other important data being released Friday morning.

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, sales with higher levels of investor demand usually make bonds more attractive to investors and brings additional funds into the bond market. The buying of bonds that follows usually translates into lower mortgage rates.

Overall, Thursday is the best candidate for most active day of the week in terms of mortgage rate movement with the Durable Goods report, Chairman Yellen’s congressional appearance and a Treasury auction taking place. Monday is the only day with nothing of importance set, so we can label it the least important day. I suspect it will be a fairly active week for mortgage rates, but not a significantly volatile week unless something unexpected happens. Still, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Weekly Mortgage Commentary-February 10, 2014

This week brings us the release of three pieces of monthly economic data that is relevant to mortgage rates in addition to two Treasury auctions and semi-annual Fed testimony. All of the economic data is set for release the latter part of the week while the other events will take place during the middle days. One of the economic reports is considered highly important to the markets, but the others are not likely to be market movers. Even with a lack of factual data the first half of the week though, we have other events that are likely to cause a fair amount of volatility in the markets and mortgage rates.

 

There is nothing of concern due Monday, leaving bond trading to be driven by the stock markets. If the major stock indexes move noticeably higher, we will probably see funds move away from bonds and into stocks. This would lead to higher mortgage rates as bond prices and yields move in opposite directions. Mortgage rates tend to follow bond yields, so we prefer to see bond prices go up, pushing yields and rates lower. On the other hand, stock selling could drive yields lower Monday, leading to a downward move in rates.

Newly appointed Fed Chairman Yellen will deliver the Fed’s semi-annual testimony on the status of the economy late Tuesday and Thursday mornings. She will be speaking to the House Financial Services Committee Tuesday morning and the Senate Banking Committee Thursday. Market participants will watch her words very closely. The Fed is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what is said during this testimony. Look for her to address our employment situation, inflation, global financial issues and possibly the Fed’s tapering of QE3 and their impact on the overall economy. Her testimony begins at 10:00 AM ET with a prepared statement which is then followed by Q & A with committee members. Her prepared words are expected to be released at 8:30 AM Tuesday, so we could see a reaction early Tuesday morning. I am expecting to see the markets fluctuate Tuesday morning, possibly affecting mortgage rates also. The first day of testimony usually causes the most volatility because the prepared statement made by the Chairman on the second day often differs little from that of the first day.

The two important Treasury auctions come 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 likely result in upward afternoon revisions to mortgage rates.

This week’s first release is one of the more important ones we get each month. The Commerce Department will post January’s Retail Sales data early Thursday morning. This report is very important to the financial markets because it measures consumer spending. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched quite closely. If Thursday’s report reveals weaker than expected retail-level sales, the bond market should thrive and mortgage rates will fall since it would be a sign that the economy is not as strong as many had thought. However, a stronger reading could lead to higher mortgage rates Thursday. Analysts are currently expecting to see no change from December’s level of spending.

Friday has the remaining two reports scheduled. January’s Industrial Production data will be released mid-morning Friday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities and can have a moderate impact on the financial markets. Analysts are expecting to see a 0.3% increase in production from December to January. A decline in output would be good news and should push bond prices higher, lowering mortgage rates Friday.
February’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer willingness to spend and also usually has a moderate impact on the financial markets. If it shows an increase in consumer confidence, the stock markets may move higher and bond prices could fall. It is currently expected to come in at 80.2, down from January’s final reading of 81.2. That would indicate consumers were a little less optimistic about their own financial situations than last month and are less likely to make large a purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, this would be considered slightly favorable news for bonds and mortgage pricing.

Overall, Tuesday or Thursday are likely to be the most important days for mortgage rates this week. The calmest will probably be Monday with it being the only day without something of relevance scheduled. The afternoon auctions and late morning starting times for the Fed testimony means there is a good likelihood of seeing intraday revisions to mortgage rates multiple days as the markets react to those events. Therefore, it would be a good idea to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Weekly Mortgage Commenary-January 13, 2014

This week has seven economic reports that are relevant to the bond market and mortgage pricing. Some of the data is considered to be highly important and we have reports set for release four of the five days. In addition to the data, there are also a relatively high number of public speaking engagements for Federal Reserve members. There is nothing of importance scheduled for release Monday, but if Friday’s strong rally extends into Monday’s trading we should see further improvements to mortgage rates.

The first economic report of the week will be posted early Tuesday morning when the Commerce Department will release December’s Retail Sales data at 8:30 AM ET. This Commerce Department report measures consumer spending by tracking sales at U.S. retail level establishments. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely. Rising consumer sales fuels expectations for broader economic growth that makes long-term bonds less attractive to investors. Current forecasts are calling for no change from November’s sales. A decline in sales would be good news for bonds and mortgage rates because it would hint at weaker than thought economic growth.

Wednesday has two reports scheduled for release that have the potential to influence mortgage rates. The first and more important is the Labor Department’s Producer Price Index (PPI) at 8:30 AM ET. The PPI is important to the markets and mortgage rates because it measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.3% rise in the overall reading and a 0.1% increase in the more important core reading that excludes volatile food and energy prices. A larger than expected increase in the core reading could mean higher mortgage rates Wednesday since inflation is the number one nemesis of the bond market. It erodes the value of a bond’s future fixed interest payments, making them less attractive to investors. Accordingly, they are sold at a discount to offset the drop in value, which drives their yields higher. And since mortgage rates follow bond yields, rising inflation usually translates into higher interest rates for borrowers.

Also Wednesday, the Federal Reserve’s Beige Book will be posted 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 Fed 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. Any reaction to the report though will come during afternoon trading.

Thursday’s sole monthly report is December’s Consumer Price Index (CPI) at 8:30 AM. This is one of the most important monthly reports for the bond market each month since it measures inflationary pressures at the consumer level of the economy. As with the PPI, there are two readings in the release. The overall index is expected to increase 0.3% while the core data rose 0.3%. Weaker than expected readings would be favorable news and should lead to bond strength and lower mortgage rates Thursday morning.

The remaining three reports are all set for Friday morning. The first data of the day is December’s Housing Starts at 8:30 AM. It helps us measure housing sector strength and future mortgage credit demand by tracking construction starts of new homes. It is not considered to be one of the more important releases each month, so I don’t see it causing much movement in mortgage rates Friday but does carry the potential to affect trading and rates if it shows a significant surprise. Analysts are expecting to see a decline in new home starts between November and December.

December’s Industrial Production report has a release time of 9:15 AM ET Friday. This data measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength or weakness. Current forecasts are calling for an increase in production of 0.3% from November’s level. A weaker reading would be considered good news for bonds and could help lower mortgage rates as it would point towards a manufacturing sector that was softer than many had thought.

The final report of the week is January’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to slightly change mortgage rates. If consumers feel better about their own financial and employment situations, they are more apt to make a large purchase in the near future, fueling economic growth. Good news would be a reading weaker than the 83.0 that is expected and even better would be lower than December’s 82.5.

There also are speaking engagements by current Fed members each day, with some days having multiple appearances scheduled. The topics of some of them appear to be directly related to economic growth, so their words can also influence the markets enough affect mortgage rates. Their speaking times range from early morning to post-closing, so we could see markets react at different times of the day. Fed Chairman Bernanke is due to speak late morning Thursday.

Overall, Tuesday or Thursday will probably be the most active day for mortgage rates with some key economic data being posted both days. The least active day will likely be Monday, although we could see last Friday’s afternoon strength extend into Monday’s early trading. That would be good news for mortgage rates as many lenders already improved rates during afternoon trading Friday. The stock markets, which I believe are due for a pullback, also can be a big influence on bond trading and mortgage pricing any day (stock weakness should equate to bond strength). I still like what I see in bonds right now even after the recent rally and would not be surprised to see further gains that drive the benchmark 10-year Treasury Note yield and mortgage rates lower. However, this week’s data is important enough to reverse last week’s downward move, so while the overall tone in the bond market is positive, you should still maintain contact with your mortgage professional if still floating an interest rate in case that changes.

Weekly Mortgage Commentary-January 6, 2014

This week brings us the release of only two monthly reports that are relevant to the bond market and mortgage rates, but one of them is considered to be extremely important. In addition to those reports, we also will get the minutes from the last FOMC meeting and two Treasury auctions that have the potential to influence the bond market and quite possibly mortgage rates.

The Commerce Department will post November’s Factory Orders data late Monday morning. This data gives us a fairly important measurement of manufacturing sector strength. It is similar to the Durable Goods Orders release that was posted just before Christmas, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as appliances, electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see an increase of 1.7% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a minor change in rates if it shows a sizable variance from forecasts. The smaller the increase, the better the news it is for mortgage pricing.

November’s Goods and Services Trade Balance will be posted early Tuesday morning. It measures the size of the U.S. trade deficit and is expected to show a $40.4 billion 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 Tuesday.

There are Treasury auctions scheduled several days this week, but the two that are the most likely to affect mortgage rates 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. Results will be posted at 1:00 PM ET each day, so any reaction will come during early afternoon trading.

Also Wednesday is the release of the minutes from the last FOMC meeting. They will give market participants insight to the Fed’s thinking and concerns regarding the economy, inflation and monetary policy. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they won’t affect the markets or mortgage rates until afternoon hours. I don’t suspect this particular set of minutes will cause too much concern or excitement because the last FOMC meeting was followed by revised Fed forecasts and a press conference by Chairman Bernanke. Although, the meeting did yield the first reduction in the Fed’s current bond buying program (QE3). Therefore, analysts will be looking for any tidbits that could help predict when the next reduction will be made.

The big news of the week will come at 8:30 AM Friday when the Labor Department will post December’s employment figures. The Employment report is arguably the single most important monthly release we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a decline in payrolls and flat earnings would be ideal news for the bond market.
Current forecasts call for no change from November’s unemployment rate of 7.0%, 197,000 new jobs added to the economy and an increase in earnings of 0.2%. If we see weaker than expected results, the bond market should rally and stocks should fall, improving mortgage rates noticeably Friday. However, stronger than expected readings will likely raise optimism about the economy, pushing stocks and mortgage rates sharply higher.

Overall, Friday is the key day of the week with the almighty Employment report being posted, but Wednesday afternoon also has a chance to be pretty active. The least active day will likely end up being Tuesday and Thursday doesn’t have too much to be concerned about either. The benchmark 10-year Treasury Note yield closed just below 3.00% last week. I will be watching it very closely for mortgage rate direction over the next several weeks. It has been in a tight range between 2.95% and 3.00%. If we could get enough favorable news to push it below 2.95%, we should see a noticeable downward move. Since mortgage rates follow bond yields, that would be good news for mortgage shoppers. On the other hand, breaking above 3.00% and staying above could indicate a sharp upward move in rates over the next couple weeks. Therefore, please keep an eye on the markets and maintain contact with your mortgage professional if still floating an interest rate.

How To Help Your Real Estate Broker Help You

How To Help Your Real Estate Agent Help You

In today’s post, we’ll look at what your real estate agent can and can’t do, what you should know about real estate agents, and how you can help your agent the most.  We’ll focus on if you’re selling a home this time, and create another one on what to do if you’re a buyer in the future.

Open Houses

You may think an open house is a great idea for getting people to look at your home and push for it. But the truth is that houses rarely sell that way. People like to have a private appointment so they can take their time looking around. The open houses help your agent because it builds up their contact list.

Don’t Use Plug-In Air Fresheners

The oily or waxy smell can be a turn-off to some people. Your best bet is to bake a load of cookies before people visit.

Last Second Lookers

If your agent says that someone wants to come over in 15 minutes, let them even if the house is a bit messy. It’s these type of last minute lookers that turn into impulsive buyers.

Don’t Be Offended By Low Balls

The fact that they made an offer means you may be able to negotiate them up. Let your real estate agent see what they can do.

Read the Contract Carefully

Very successful agents often pass their listing to junior agents and let them use the name. Before you sign a contract, make certain you know who will be working with you and what they will be doing.  By having proper expectations set, you’ll have a better experience.
Some agents put in additional fees ranging from $250 to $1,500 on top of their standard commission. It’s intended to cover their brokerage’s administrative costs.
All of these fees are negotiable.

Leave Furniture or Agree to Hire A Stager

Empty rooms don’t appear larger. In fact, they may appear smaller because the potential buyer has no sense of scale. And if the potential buyer sees furniture, they can imagine themselves living in the home more easily.
That being said, always keep your counter tops clear of clutter in the kitchen and bathrooms.  If you’re still living there, keep a special place where you can swipe everything into at the last second.
And don’t go overboard with decorating like wine glasses in a tray next to the bed, or fake pies on the counter. That could turn people off.

Mutually Listen

It’s important that you feel like your agent is listening to you and your concerns. It’s just as important that you listen to the agent. They should be the expert in home sales in your area, and may have additional knowledge that you don’t
Are you looking to buy a home before the end of this year?

Weekly Mortgage Commentary-December 16, 2013

This week has nine monthly or quarterly economic reports scheduled for release in addition to some key Fed events and a couple of Treasury auctions that could potentially affect mortgage rates. There is data set for release every day of the week, but the more important events will take or be posted the middle days. Still, with the majority of the days having multiple reports or events scheduled, there is a good chance of seeing plenty of movement in mortgage pricing this week.

 

The week opens with revised 3rd Quarter Productivity numbers at 8:30 AM ET Monday. This index is expected to show an upward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn’t necessarily bad for the bond market. It’s the conditions around an expanding economy, such as inflation, that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 2.8%, up from the previous estimate of 1.9%. The higher the reading, the better the news it is for the bond market.

Next up is November’s Industrial Production report mid-morning Monday. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting it to show a 0.4% increase in output, indicating modest manufacturing growth. A smaller than expected rise would be good news for bonds, while a stronger reading may result in slightly higher mortgage pricing.

November’s Consumer Price Index (CPI) will be released at 8:30 AM ET Tuesday. It is similar to last Friday’s Producer Price Index, except it tracks inflationary pressures at the more important consumer level of the economy. Current forecasts call for an increase of 0.1% in both the overall and core data readings. This data is one of the most watched inflation indexes, which is extremely important to long-term securities such as mortgage related bonds. Rising inflation erodes the value of a bond’s future fixed interest payments, making them less appealing to investors. That translates into falling bond prices and rising mortgage rates. Therefore, weak readings would be favorable for the bond market and mortgage shoppers.

Wednesday’s only economic report is Housing Starts, but we will get three months worth of it. Due to the government shutdown in October and problems collecting data last month, we will see results for September, October and November at 8:30 AM ET Wednesday. This data isn’t known to be highly influential on bonds or mortgage pricing. It does give us an indication of housing sector strength by tracking new home groundbreakings, so it is worth watching. All three months are expected to show increases, indicating strength in the new home portion of the housing sector. Slowing starts would be favorable for the bond market, although a wide variance is likely needed for the data to cause noticeable movement in the markets or mortgage rates.

Wednesday also has some significant FOMC events that can be highly influential on the financial and mortgage markets. The two-day FOMC meeting that began Tuesday will adjourn at 2:00 PM ET Wednesday. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting, but traders and analysts are anxious to get the Fed’s current economic forecasts and any word of a potential reduction in the Fed’s current bond buying program. Also worth noting is that the meeting is ending earlier than the traditional 2:15 PM because it is one of the meetings that will be followed by a press conference hosted by Fed Chairman Bernanke. The meeting will adjourn at 2:00 PM, forecasts will be posted at 2:00 PM and the press conference will begin at 2:30 PM. It is fairly safe to assume that all of that will lead to afternoon volatility in the markets and mortgage rates Wednesday.

Thursday has two monthly reports scheduled for 10:00 AM ET that we will be watching. The first is November’s Existing Home Sales figures from the National Association of Realtors, giving us a measurement of housing sector strength and mortgage credit demand. It is expected to show a decline in sales, indicating a slowing housing sector. A sizable decline in sales would be considered positive for bonds and mortgage rates because a softening housing market makes broader economic growth more difficult. But unless the actual readings vary greatly from forecasts, the results will probably have little or no impact on mortgage rates.

The Conference Board will also release their Leading Economic Indicators (LEI) for the month of November late Thursday morning. This release attempts to measure or predict economic activity over the next three to six months. It is expected to show a 0.6% increase, meaning that it predicts economic growth over the next several months. This probably will not have much influence on bond prices or affect mortgage rates unless it shows a much stronger reading than the 0.6% rise that is forecasted. The weaker the reading, the better the news it is for bonds and mortgage pricing.

Friday has the remaining report with the final revision to the 3rd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. I don’t think this data will have an impact on mortgage rates unless it varies greatly from its expected reading. Last month’s first revision showed that the economy expanded at a 3.6% annual pace during the quarter and this month’s final revision is expected to show no change from that level. A revision higher than the 3.6% rate that is expected would be considered bad news for bonds. But since this data is quite aged at this point and 4th quarter numbers will be posted next month, I don’t think it will have much of an impact on Friday’s mortgage rates.

In addition to this week’s economic data and Fed events, we also have Treasury auctions scheduled the first three days. The two that are most likely to influence mortgage rates are Wednesday’s 5-year and Thursday’s 7-year Note sales. If those sales are met with a strong demand, particularly Thursday’s auction, bond prices may rise enough to lead to improvements in mortgage rates shortly after the results are posted. They will be announced at 11:30 am Wednesday and 1:00 PM Thursday. But a lackluster investor demand may create bond selling and upward revisions to mortgage rates Wednesday and/or Thursday.

Overall, Wednesday is the key day of the week due to the afternoon Fed schedule. Tuesday’s data is also key to the bond market, but I think we will see the most volatility in the markets and mortgage rates Wednesday. Despite the GDP reading, I believe Friday is the best candidate for calmest day. Generally speaking, this is probably going to be a pretty active week for the bond and mortgage markets. It is likely that I will remain very cautious towards rates until the benchmark 10-year Treasury Note yield breaks above 2.90% (currently at 2.87%) for more than a few minutes to see if that truly is a strong resistance level or if it will continue to rise past. Therefore, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future as we are getting very close to that threshold.

Weekly Mortgage Commentary - December 9, 2013

This week has only two pieces of monthly economic data scheduled for release in addition to a couple of Treasury auctions that have the potential to influence mortgage rates. Both of the economic releases are considered highly important though and the Treasury auctions are the more important set of auctions we regularly deal with, so despite the lack of a busy calendar we still should see noticeable movement in rates this week.

Monday has no relevant economic data scheduled, but does have several afternoon speaking engagements by Federal Reserve members. The topics of a couple of the speeches are related to the economy, so analysts and traders will be watching them for any surprises or tidbits that could alter forecasts of what future moves the Fed may make and when they will be made. Often these appearances are non-factors because they are related to banking rules or other boring topics. Since some of Monday’s look to be directly related to current and future economic conditions, we could see one or more of them affect afternoon trading and mortgage pricing.

There are Treasury auctions scheduled for several days this week, but the two we need to watch are the 10-year Note sale Wednesday and the 30-year Bond sale Thursday. Wednesday’s auction is the more important one and will likely have a bigger influence on mortgage rates. Results of the sales will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, particularly international buyers, we should see strength in the broader bond market and improvements to mortgage pricing during afternoon hours those days. On the other hand, a weak interest in the auctions could lead to upward revisions to mortgage rates.

November’s Retail Sales report is scheduled for release Thursday at 8:30 AM ET. This report will give us a key measurement of consumer spending by tracking sales at retail level establishments. This data is highly important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rapidly rising consumer spending raises the possibility of seeing solid economic growth. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in retail sales will likely drive bond prices lower and mortgage rates higher Thursday. Current forecasts are calling for an increase of 0.6% in November’s sales.

The second and final relevant report of the week will be November’s Producer Price Index (PPI) early Friday morning. It measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices, giving a more stable reading for analysts to consider. If Friday’s release reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and drive mortgage rates higher. If we see in-line or weaker than expected numbers, the bond market should respond well and mortgage rates could fall. Current forecasts are showing a 0.1% decline in the overall index and a 0.1% rise in the core data.

Overall, I suspect Thursday will be the most active day of the week with the consumer spending data and 30-year Bond auction, but Friday’s data can also cause movement in rates. The calmest day will likely be Tuesday. It will probably be a calmer week than last week in terms of mortgage rate movement although we still should see rate changes multiple days. The benchmark 10-year Treasury yield closed the week at 2.88% after touching 2.92% immediately after November’s stronger than forecasted Employment report was posted. I believe this week will help determine if that yield will break above 2.90% again or retreat towards 2.62%. Since mortgage rates tend to follow bond yields, the latter would be preferred by mortgage shoppers. Because the 2.92% on Friday was momentarily, I am hesitant to rely on it as a basis in switching to Float recommendations. Therefore, I am maintaining the conservative stance towards locking or floating an interest rate for the time being.

Weekly Mortgage Commentary-December 2, 2013

This week is packed with economic data with 10 pieces set for release, including two that are considered to be highly important to the markets and mortgage rates. November’s manufacturing index from the Institute for Supply Management (ISM) is the first, coming at 10:00 AM ET Monday. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for a decline in sentiment from October to November. October’s reading was previously announced as 56.4. A weaker reading than the expected 55.5 would be good news for the bond market and mortgage rates. A reading above 50 means that more surveyed business executives felt business improved during the month than those who felt it had worsened. The lower the reading the better the news for bonds because waning sentiment indicates a slowing manufacturing sector and makes broader economic growth less likely.

There is nothing of importance scheduled for Tuesday, but Wednesday has three reports starting with October’s Goods and Services Trade Balance at 8:30 AM ET. This report gives us the size of the U.S. trade deficit, but it is considered to be of low importance to mortgage rates. It is actually the week’s least important monthly report. It is expected to show a $40.5 billion trade deficit, which would be a decline from September. Unless it varies greatly from forecasts, I don’t expect this data to affect mortgage pricing Wednesday.

Next on tap is two months’ worth of new home sales data from the Commerce Department. At 10:00 AM ET Wednesday we will get September’s and October’s New Home Sales reports that will give us an indication of housing sector strength. September’s data was delayed during the government shutdown, so we will get both reports this week. This data is not considered to be highly important because new home sales make up only a small portion of all home sold in the U.S. Analysts are expecting to see an increase in September’s sales but a decline in October’s sales. Ideally, bond traders prefer to see declining sales as it would point towards weakness in the housing sector. However, unless there is a significant surprise in the results, the data will probably have only a modest impact on Wednesday’s mortgage rates.

Also Wednesday, the Federal Reserve will release their Beige Book at 2:00 PM ET. This report, which is named simply after the color of its cover, details economic conditions by Fed region. That information is relied upon heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any noticeable changes from the last update. More times than not though, this report will not influence the markets enough to cause intra-day changes to mortgage rates, but the potential to do so does exist.

The first of two revisions to the 3rd Quarter Gross Domestic Product (GDP) will be posted early Thursday morning. It is expected to show an upward revision from last month’s preliminary reading of a 2.8% annual rate of growth. The GDP measures the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic activity. Current forecasts call for a 3.0% rate of growth, meaning that there was a little more economic activity during the third quarter than previously thought. This would be bad news for mortgage rates because solid economic growth makes long-term securities such as mortgage-related bonds less appealing to investors. A modest increase shouldn’t be too detrimental to rates since it is expected. On the other hand, a sizable revision upward or downward could significantly influence the financial and mortgage markets.

October’s Factory Orders will be posted late Thursday morning. This report is similar to the Durable Goods Orders report that was released last week, except this one includes manufacturing orders for both durable and non-durable goods. This data usually isn’t a major influence on bond trading, but it does carry enough importance to impact mortgage rates if it shows a sizable variance from forecasts. Analysts are expecting to see a 1.0% decline in new orders. The larger decline, the better the news for bond prices and mortgage rates because it would signal manufacturing sector weakness. If we do see a much larger drop in new orders, the bond market could thrive, improving mortgage rates Thursday morning.

The biggest news of the week comes Friday morning when the Labor Department posts November’s Employment figures. This is arguably the most important monthly report we see, so its impact on the markets and mortgage rates is often significant. It is comprised of many statistics and readings, but the most watched ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for a 0.1% decline in the unemployment rate to 7.2% while 185,000 new jobs were added to the economy. The income reading is forecasted to show an increase of 0.2%. An ideal scenario for mortgage shoppers would be a higher unemployment rate than October’s 7.3%, a smaller increase in payrolls (or a decline) and no change in the earnings reading. If we are fortunate enough to hit the trifecta with all three, we should see the stock markets fall, bond prices rise and mortgage rates move much lower Friday. However, stronger than expected readings would likely fuel a stock rally and bond sell-off that would lead to higher mortgage rates.

October’s Personal Income and Outlays data is scheduled for early Friday morning also. This data measures consumers’ ability to spend and their current spending habits. This is important because consumer spending makes up over two-thirds of the U.S. economy. It is expected to show that income rose 0.3% and that spending increased 0.3%. Weaker than expected readings would mean consumers had less money to spend and were spending less than thought. That would be theoretically favorable news for bonds and mortgage pricing, although the Employment data will be the focus of Friday’s morning trading.

The final report of the week is the release of December’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly if it shows a sizable miss from forecasts. Consumer sentiment or confidence is tracked because the more comfortable consumers are about their own financial situations, the more likely they are to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the economy, any related data is watched closely. Friday’s release is expected to show a reading of 75.4, which would be a small rise from last month’s final reading of 75.1. A large decline in confidence would be considered good news for the bond market and mortgage rates.

Overall, look for Friday to be the most active day of the week but we should see noticeable movement in rates Monday also. And in between those days there is plenty of data being posted that may move mortgage rates. The best candidate for calmest day is Tuesday with nothing in terms of relevant economic data set for release. With so much on tap this week, there is plenty of opportunity to see large swings in the major market indexes and mortgage rates. Accordingly, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

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Weekly Mortgage Commentary-October 28, 2013

This week brings us the release of six economic reports and two relevant Treasury auctions for the bond market to digest in addition to another FOMC meeting. Most of the data is set for the first half of the week, so we could see plenty of movement in rates the first couple days. The data scheduled this week ranges from moderately to extremely important, so some reports will have a much bigger impact on trading than others. We also need to keep an eye on the stock markets as they can be heavily influential on bond market direction and mortgage rates.

 

The week kicks off Monday with the release of a moderately important manufacturing report. September’s Industrial Production report will be posted at 9:15 AM ET Monday, giving us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.3% increase in production output, indicating minor growth in the sector. Good news for the bond market and mortgage rates would be a decline in this data.

There are three reports scheduled for release Tuesday, two of which are very important to the financial and mortgage markets. The first is September’s Retail Sales report at 8:30 AM ET that measures consumer spending. This data is very important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Therefore, any related data is watched closely. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates should drop Tuesday morning. However, stronger than expected sales would fuel optimism about the economy and would likely lead to a stock rally that hurts bonds prices and pushes mortgage rates higher. Current forecasts are calling for a 0.1% decline in retail-level sales, meaning consumers spent a little less last month than they did in August. Good news for the bond market and mortgage pricing would be a larger decline in sales.

September’s Producer Price Index (PPI) is the second key report of the day, also at 8:30 AM ET. This is one of the two very important inflation readings we get each month. The index measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.2% increase in the overall index and a 0.1% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. A larger than expected increase could raise concerns in the bond market about future inflation, leading to higher mortgage rates Tuesday. However, weaker than expected readings should result in bond market strength and lower mortgage pricing.

October’s Consumer Confidence Index (CCI) is Tuesday’s last report. This Conference Board index will be released at 10:00 AM ET and gives us a measurement of consumer willingness to spend. It is expected to show a drop in confidence from last month’s 79.7 reading. That would mean that consumers felt a worse about their own financial and employment situations than last month, indicating they are less likely to make large purchases in the near future. That would be good news for the bond market because consumer spending makes up a significant part of our economy. As long as the reading doesn’t exceed the forecasted 74.1, we will likely see the bond market react favorably to this report.

Wednesday’s only economic data is also very important to the bond market. September’s Consumer Price Index (CPI) will be released at 8:30 AM ET Wednesday. It measures inflationary pressures at the very important consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see a rise of 0.1% in the overall index and an increase of 0.1% in the core data reading. A larger than expected increase in the core reading could raise inflation concerns, pushing bond prices lower and mortgage rates higher. Inflation is the number one nemesis of the bond market because it erodes the value of a bond’s future fixed interest payments, so when inflation is a threat, even down the road, bonds sell for discounted prices that push their yields higher. And since mortgage rates tend to follow bond yields, this leads to higher rates for mortgage borrowers.

This week’s FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. There really is no possibility of the Fed changing key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of a change in Fed sentiment or possibly further development on tapering of their current bond buying program. Possible effects the government shutdown had on the economy will also be of interest to the markets. The meeting will adjourn at 2:00 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours.

There is no major economic news set for release Thursday, but there is a highly influential report scheduled for late Friday morning. That will come from the Institute for Supply Management (ISM), who will post their manufacturing index for October at 10:00 AM ET. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength or weakness. It is considered to be one of the more important reports we see each month, partly because it is the first report every month that tracks the preceding month’s activity. Friday’s release is expected to show a reading of 55.0, indicating that manufacturer sentiment slipped from September’s level of 56.2. This means fewer surveyed business executives felt business improved during the month than in September, hinting at manufacturing sector weakness. A smaller than expected reading would be good news for bonds and mortgage rates, especially if it drops below the benchmark 50.0.

This week also has Treasury auctions scheduled the first three days. The only two that have the potential to influence mortgage rates are Tuesday’s 5-year and Wednesday’s 7-year Note sales. If those sales are met with a strong demand from investors, particularly Wednesday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to upward revisions to mortgage rates.

Overall, it appears Tuesday or Wednesday could be the most active day for mortgage rates and Thursday will probably be the lightest. The importance of Friday’s sole report makes it likely to be an active day also, although I suspect the most movement will take place the middle days. With data or other events relevant to mortgage rates scheduled four of the five days, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Weekly Mortgage Commentary-October 21, 2013

This week brings us the release of five economic reports that may influence mortgage rates, one of which is arguably the single most important monthly report for the markets. There is data set for release four of the five days, so we can expect to see movement in rates multiple days this week. We are also into corporate earnings season, which can heavily influence stock trading and indirectly bond trading. If earnings reports start to indicate a general consensus of weaker earnings than analysts were expecting, stocks should go into selling mode and bonds could benefit as investors seek the safety of government and mortgage bonds.

 

The National Association of Realtors will start the week’s activities with the release September’s Existing Home Sales data late Monday morning. This report gives us an indication of housing sector strength and mortgage credit demand by tracking home resales. I don’t see it having much of an influence on the bond market or mortgage rates, but a reading that varies greatly from analysts’ forecasts could lead to a slight change in mortgage pricing. It is expected to show a decline in sales from August to September, meaning the housing sector softened. That would be favorable news for the bond market since a weakening housing sector makes a broader economic recovery less likely and allows bonds to remain appealing to investors.

The Labor Department will post September’s Employment report early Tuesday morning, rescheduled from earlier this month due to the government shutdown. This extremely important report will reveal the U.S. unemployment rate, number of new payrolls added or lost during the month and average hourly earnings. These are considered to be key 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.

If this report gives us weaker than expected readings, bond prices should move higher and we should see lower mortgage rates Tuesday. Although, it is worth noting that the accuracy of the data is likely to be questioned as a result of the shutdown. However, stronger than forecasted readings would be bad news for the bond market and mortgage rates. Analysts are expecting to see the unemployment rate remain at 7.3%, an increase of 183,000 new jobs from August’s level and a 0.2% increase in earnings.

There is nothing of importance set for release Wednesday and Thursday has only a minor housing report scheduled. That would be September’s New Home Sales at 10:00 AM ET. This data covers the small percentage of home sales that Monday’s Existing Home Sales report didn’t include. It is expected to show an increase in sales of newly constructed homes, but regardless of its results I am not expecting it to have a significant impact on mortgage rates Thursday.

Friday has two pieces of economic data that could affect mortgage rates. The Commerce Department will post Durable Goods Orders for September at 8:30 AM ET. This report gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for an increase in new orders of approximately 3.5%. If we see a much larger increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significantly weaker than expected reading should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance from forecasts likely will have little impact on Friday’s bond trading or mortgage pricing.

The week’s last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers’ willingness to spend. If consumers are more confident in their own financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watch closely. Current forecasts show this index falling from the preliminary reading of 75.2 to 74.5, meaning confidence was not as strong this month as previously thought. That would be good news for mortgage rates.

Overall, Tuesday is the most important day of the week with the almighty Employment report now scheduled. None of the other data set for release is considered key or market-moving, but most of the reports can still affect mortgage rates if they show a noticeable variance from forecasts. Wednesday should be the calmest day unless something unexpected happens. However, stock movement can drive bond trading and impact mortgage rates any day, so please proceed cautiously if still floating an interest rate. Maintaining contact with your mortgage professional would be prudent this week.

Weekly Mortgage Commentary-October 14, 2013

This week had a handful of economic reports for us to follow that are relevant to mortgage rates, but it will be more of the same as the past two weeks with no resolution yet in Washington. There were five monthly reports scheduled this week that we normally would need to be concerned with. However, due to the shutdown we are likely to only get two of them.

 

The bond market will be closed Monday in observance of the Columbus Day holiday as will most banks, so there will not be an update to this report Monday. The stock markets will be open for trading though.  This means that the lenders that are open for business will likely not be issuing new rates Monday, opting to use Friday’s pricing or not accepting new rate locks.

 

The bond market will reopen for regular trading Tuesday morning. It is worth noting though that due to weakness in bonds late Friday, we can expect to see an increase of approximately .250 of a discount point when new rates are posted unless your lender revised pricing higher already Friday afternoon.

 

What we will see this week in terms of monthly economic news, assuming that nothing changes in Washington, is the Federal Reserve’s Beige Book report Wednesday afternoon and September’s Leading Economic Indicators (LEI) Friday morning. The Federal Reserve is self-funded and therefore not affected by the government shutdown and the LEI comes from a non-governmental business research group that is based in New York.

The Beige Book will be posted at 2:00 PM ET Wednesday, which is named simply after the color of its cover. This report details economic conditions throughout the U.S. by Fed region and is relied upon heavily by the Federal Reserve when determining monetary policy at their FOMC meetings. If it reveals stronger or noticeably weaker signs of economic growth from the last release, we could see bond prices move and mortgage rates revise Wednesday afternoon. Signs of stronger growth would be negative for rates while much weaker conditions than the previous release would be favorable for the bond market and mortgage shoppers.

September’s LEI will be released by the Conference Board at 10:00 AM ET Friday morning. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.6% from August’s reading. This would indicate that economic activity is likely to increase over the next couple of months. That would be relatively bad news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a decline.

The reports that are delayed are September’s Consumer Price Index (CPI), Housing Starts and Industrial Production. The CPI measures inflation at the consumer level of the economy, so it is considered very important to the bond market and will be missed. The other two releases are generally considered to be moderately important to the bond and mortgage markets but still can affect mortgage rates if they show significant surprises.

Overall, this holiday-shortened week will still likely bring multiple days of noticeable movement in rates. Besides the minimal economic data to drive trading, we can also expect any rumors or progress regarding the shutdown or upcoming debt ceiling deadline to also influence the financial markets and mortgage rates. I currently believe there is much more risk by floating an interest rate than potential reward if closing in the near future. Therefore, please proceed cautiously if still floating a rate and maintain contact with your mortgage professional.

Weekly Mortgage Commentary - October 7, 2013

This week has four pieces of economic data scheduled that was expected to influence mortgage rates in addition to a couple Treasury auctions and the minutes from the most recent FOMC meeting. However, with a resolution to the stalemate in Washington nowhere in sight yet, we likely won’t see most of the week’s economic data. That will leave bond traders to rely on other factors for bond direction and mortgage rate movement. 

The relevant economic reports that are scheduled for release but are unlikely to be posted are August’s Goods and Services Trade Balance on Tuesday and Friday’s release of September’s Retails Sales report and Producer Price Index (PPI). Tuesday’s report is not considered to be of high importance to the markets, so it won’t be missed. However, Friday’s data is considered to be key readings of consumer spending and producer level inflation that could have been market-movers.

What we will see this week are the minutes from the most recent FOMC meeting, which was the one that the Fed opted to delay the much-anticipated tapering of their bond purchases. We also will get last week’s unemployment numbers Thursday morning and the University of Michigan’s Index of Consumer Sentiment late Friday morning. The results of these will be magnified because the government shutdown has significantly limited the release of the economic data that was scheduled since the first of the month.

The last FOMC meeting minutes will be posted Wednesday afternoon. These may be a major mover of the markets or could be a non-factor, depending on what they say. However, with little else being posted this week they will likely be more influential than usual. The keys will be concerns over the economy, inflation and the Fed’s next monetary policy move. If Fed members were concerned about the economy continuing to grow, we may see the bond market move higher and mortgage rates lower Wednesday afternoon. It will be interesting to see how much debate and disagreement amongst members took place during the meeting, particularly about tapering QE3. They will be posted at 2:00 PM ET, so any reaction will come during afternoon trading.

Also Wednesday is the first of two important Treasury auctions this week. The sale of 10-year Notes will be held Wednesday while 30-year Bonds will be sold Thursday. We often see some weakness in bonds ahead of the sales as the firms participating prepare for them. However, as long as the auctions are met with decent demand from investors, the firms usually buy them back. This tends to help recover any presale losses. But, if the sales are met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM each sale day.

The last event of the week is October’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. Rising confidence indicates consumers feel better about their own financial and employment situations, meaning they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related date is watched closely. Good news for the bond market would be a sizable decline in consumer confidence. It is expected to show a reading of 74.5, down from September’s final reading of 77.5.

Overall, I see Wednesday as the key day of the week, although the most movement in the markets and mortgage pricing will probably take place during afternoon hours. We should see more movement in rates Thursday and Friday also even though the reports of those days usually don’t draw high levels of attention. It is the inability to get the key data that is raising the stature of those reports. This could change if something unexpected happens, such as a compromise in Washington D.C. Since that does not appear to be likely in the immediate future, we are left with the reduced activity calendar this week. Still, we can see a fairly significant move in rates if it appears progress is being made in Congress, so please proceed cautiously if still floating an interest rate and closing in the near future.

Weekly Mortgage Commentary-September 30, 2013



This week brings us the release of only three monthly economic reports that are likely to influence mortgage rates. However, two of those three releases are extremely important to the financial and mortgage markets and can cause significant movement in mortgage rates if they show surprises. We also have the pending government shutdown early this week that will influence trading and could affect two of those scheduled economic releases.

There is nothing of importance scheduled for release Monday in terms of economic data. However, it will still be an interesting day because it appears that a deal in Washington D.C. to avoid a government shutdown is not going to happen. This means that many government operations will come to a halt at midnight ET Monday evening. While that is a problem outside the mortgage world, it also should be noted that there are some specific problems to mortgage shoppers. As of Tuesday, most government mortgage loans (FHA/USDA) would come to a standstill but VA loans should not be affected unless the shutdown turns into an extended period. All conventional loans should proceed without issue. And it is my understanding that the National Flood Insurance Program will not be affected by a temporary shutdown either.

Still, the impact on the financial and mortgage markets could be significant. It is widely believed that a shutdown cannot be avoided at this point, so we can expect to see the markets open Monday reflecting that result. Also complicating matters is the fact that a shutdown means we will not get the economic reports that are compiled and posted by government agencies this week, one of which is extremely important to the markets. That would be Friday’s monthly employment report from the Labor Department.

Tuesday has the first report of the week when the Institute for Supply Management (ISM) posts their manufacturing index for September at 10:00 AM ET. The ISM is not a governmental agency, so the shutdown will not impact this release. The index measures manufacturer sentiment and it can be highly influential on the markets and mortgage rates. Analysts are expecting to see a small decline from August’s 55.7 reading, meaning surveyed manufacturers felt business conditions worsened from the previous month. The 50.0 benchmark is extremely important since a reading below that level means more surveyed executives felt business worsened in the month than those who said it had improved. This data is important not only because it measures manufacturer sentiment, but it is also very recent data. Some economic releases track data that is 30-60 days old, but the ISM index is only a few weeks old. Actually, it is the first report that we see each month. If it reveals a reading below 55.1, meaning sentiment fell short of expectations, we should by theory see the bond market move higher and mortgage rates fall Tuesday.

Wednesday’s monthly economic data will come from the Commerce Department, who are set to post August’s Factory Orders data at 10:00 AM ET. This manufacturing sector report is similar to last week’s Durable Goods Orders release, but also includes orders for non-durable goods. It can impact the bond market enough to slightly change mortgage rates if it varies from forecasts by a wide margin. Analysts are forecasting a 0.3% increase in new orders, meaning manufacturing activity grew slightly in August. Good news for the bond market and mortgage pricing would be a sizable decline in orders.

The Labor Department is scheduled to post September’s Employment report early Friday morning. This report will reveal the U.S. unemployment rate, number of new payrolls added or lost during the month 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.
If we do see this report and it gives us weaker than expected readings, bond prices should move higher and mortgage rates should move lower Friday. However, stronger than forecasted readings could cause a sizable spike in mortgage pricing and erase the improvement in rates since the Fed opted to delay tapering their bond purchases. Analysts are expecting to see the unemployment rate remain at 7.3%, an increase of 183,000 new jobs from August’s level and a 0.2% increase in earnings.

Overall, I am expecting to see a good amount of volatility in the markets and mortgage rates this week. Based on an economic calendar, Tuesday and Friday are the key days but the impasse in Washington puts into question whether we will even see some of that data let alone if it will be the biggest influence on this week’s trading. Monday is likely to be an extremely active day barring a last minute trick during early trading to avoid the shutdown Monday night. Tuesday will also be a key day with the ISM index, regardless of the outcome in Washington. The rest of the week’s data is in limbo, so it is difficult to make a prediction beyond that point. Accordingly, it would be prudent to maintain fairly constant contact with your mortgage professional this week if still floating an interest rate as we may see significant moves multiple days.