Daily Mortgage Rate Lock Advisory

This week brings us the release of only two economic reports for the bond market to digest. It also is the beginning of corporate earnings season. Those quarterly earnings reports can lead to significant volatility in the stock markets, which could influence bond trading and mortgage rates.

The first piece of economic news that may affect mortgage rates is Thursday’s weekly unemployment figures from the Labor Department. Analysts will be paying a little more attention to this week’s release than usual because last week’s report showed that claims had crossed above 400,000 the previous week. This is an important benchmark that will be watched closely. Last week’s numbers didn’t get much attention because they were posted at the same time as June’s monthly Employment report. But with little data scheduled for release this week, I believe more focus will be made on Thursday’s report.

Both of the week’s monthly economic reports are scheduled to be p osted Friday morning. The first is May’s Goods and Services Trade Balance report early Friday morning, which measures the size of the U.S. trade deficit. This data is not considered to be of high importance to the bond market and will not likely have an impact on mortgage rates. However, if it does vary greatly from analysts’ forecasts of a $62.1 billion deficit, we may see some movement in bond prices and therefore possibly mortgage pricing.

The second is the University of Michigan’s Index of Consumer Sentiment that is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary reading for July will be posted late Friday morning and is expected to fall slightly from June’s final reading of 56.4. This would indicate that consumers were a little less comfortable with their own financial situations this month than last month. It is believed that if consumers are confident in their own finances, they are more a pt to make large purchases in the near future. And with consumer spending making up two-thirds of our economy, investors pay close attention to reports such as these.

Also worth mentioning are a couple of public speeches by Fed members including Fed Chairman Bernanke and a 10-year Treasury auction of inflation protected notes. The speeches will be watched closely for any possible hint of the Fed’s next move. The Treasury auction likely will not have an impact on rates, but could influence bond trading slightly if it is met with a strong or weak demand from investors. In a very light week of economic news such as this week is, events like these sometimes have a greater impact on the markets than if they took place during a busy week of news.

Overall, I am expecting to see a fairly calm week in mortgage rates. Friday will be the most important day with the two reports scheduled for release. If the corporate earnings reports that are scheduled for this week are a disappointment, we could see stocks move lower and investors seek safe-haven in bonds. This would likely help push bond prices higher and mortgage rates lower for the week.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… 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.

Tuesday’s bond market has opened in positive territory following the release of much weaker than expected economic data. The stock markets are showing losses with the Dow down 71 points and the Nasdaq down 22 points. The bond market is currently up 12/32, which will likely improve this morning’s mortgage rates by approximately .125 of a discount point.

The Conference Board posted June’s Consumer Confidence Index (CCI) late this morning, revealing a reading of 50.4. This was much lower than the forecasted reading of 56.0 and was the lowest reading since February 1992. This indicates that consumers are much less optimistic about their own financial situations than many had thought. That is considered good news for bonds and mortgage rates because the falling confidence usually means consumers are less apt to make large purchases in the near future. With consumer spending making up two-thirds of the U.S. economy, any related data often has a big impact on the markets.

The only important release scheduled for tomorrow is May’s Durable Goods Orders, which gives us an indication of manufacturing sector strength. It is known to be quite volatile from month to month and is expected to show no change new orders from April to May. A decline in new orders would be the ideal scenario for the bond market and could lead to a decline in mortgage pricing tomorrow morning. However, tomorrow afternoon’s events will probably influence rates much more than the day’s data will.

There are two housing related reports scheduled for release this week, with the first coming tomorrow morning. May’s New Home Sales will be released tomorrow while Existing Home Sales will be posted Thursday morning. These reports give us a measurement of housing sector strength and mortgage credit demand, but usually do not cause much movement in mortgage rates.

The FOMC meeting that began today will adjourn tomorrow afternoon. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting. But, as we have seen so many times in the past, it is the post meeting statement that often creates the most volatility in the markets. They could give an opinion of the overall economy, hinting at a possible future move or lack of one. Statements like these could cause a knee-jerk reaction in the markets and possibly mortgage pricing tomorrow afternoon. I suspect we will hear concerns about inflation that will lead to selling in bonds that will drive mortgage rates higher.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 and 60 days… Lock 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.

Friday’s bond market has opened flat following the release of mixed economic data and new record oil prices. The stock markets are showing losses with the Dow down 39 points and the Nasdaq down 17 points. The bond market is currently up 1/32, but we should see an improvement in this morning’s mortgage rates of approximately .375 of a discount point due to strength in bonds late yesterday.

Today’s data gave us mixed results. April’s Housing Starts showed stronger than expected results with an increase in starts of new homes. It was expected to reveal another decline in new home starts, indicating that the housing sector was stronger than thought. This is negative news for bonds because the weak housing sector is believed to have significantly contributed to the weakness in the overall economy.

The second report of the day was May’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. It showed a reading of 59.5 that w as lower than forecasts, meaning that consumers were less optimistic about their own financial situations than many had thought. This is good news for the bond market and mortgage rates because waning confidence usually means consumers are less apt to make large purchases in the near future.

Next week is light in the number of reports scheduled for release, but it does bring us a couple of important events. The first piece of data is Monday’s release of the Leading Economic Indicators (LEI). It is a moderately important report but can influence bonds enough to lead to slight changes in mortgage rates. Look for more details on next week’s events in Sunday’s weekly preview.

If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place ov er 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.