Daily Mortgage Rate Lock Advisory

Rate Lock Advisory – Sunday Mar. 15th

This week brings us the release of five relevant economic reports along with an FOMC meeting for the markets to digest. The first piece of data will come mid-morning tomorrow when February’s Industrial Production report is posted. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 1.2% drop in output. A larger decline would be considered favorable news for bonds and mortgage rates.

The Labor Department will post February’s Producer Price Index (PPI) early Tuesday morning. This 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 prices. If the index shows a large increase, inflation concerns may rise, making long-term investments such as mortgage-related bonds less attractiv e to investors. This would lead to higher mortgage rates Tuesday morning. Current forecasts are calling for a 0.4% rise in the overall reading and a 0.1% increase in the core data.

Also Tuesday is February’s Housing Starts, but it will likely not have much of an impact on mortgage rates. It gives us a measurement of housing sector strength and future mortgage credit demand, but is usually considered to be of low importance to the financial markets. It is expected to show a decline in new starts from January to February.

February’s Consumer Price Index (CPI) will be released Wednesday, which measures inflationary pressures at the very important consumer level of the economy. Its results can definitely have a huge impact on the financial markets, especially long-term securities such as mortgage-related bonds. It is expected to show a 0.3% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker t han expected readings, bond prices should rise and mortgage rates would likely fall Wednesday.

The FOMC meeting that begins Tuesday and will adjourn Wednesday at 2:00 PM ET. With key short-term interest rates practically at 0% already, there is not much the Fed can do with monetary policy at this meeting. They have previously stated that they expect rates to remain near zero for some time. Therefore, the anxiety of the post-meeting statement should be minimal and the likelihood of a major market reaction to the statement is reduced significantly. If the statement references a time frame of an economic recovery, we may see the markets react if it reveals any surprises. Other than that, I am not expecting too much movement in mortgage rates Wednesday afternoon.

The Conference Board will post its Leading Economic Indicators (LEI) for February late Thursday morning. This index attempts to measure economic activity over the next three to six months. Cur rent forecasts are calling for a 0.6% decline, indicating that economic activity will likely slow in the coming weeks. This would be good news for the bond market and mortgage rates.

Overall, look for Wednesday to be the most important day of the week due to the CPI release. Tuesday may also be an active day for rates with the PPI on tap. But the wildcard is whether stocks continue last week’s gains or if they move lower again. Stock strength would likely draw funds from bonds and lead to higher mortgage rates. However, if the major indexes fall again, funds may shift into bonds, leading to lower mortgage rates.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
©Mortgage Commentary 2009

Rate Lock Advisory – Tuesday Feb. 17th

Tuesday’s bond market has opened up sharply as economic concerns and strong stock weakness has brought bonds into favor this morning. The Dow is currently down 243 points while the Nasdaq has lost 43 points. The bond market is currently up 58/32, but we will likely see an improvement of .250 – .375 in this morning’s mortgage rates.

There are no relevant economic reports scheduled for release today. There are five economic reports worth watching this week that are likely to affect mortgage rates in addition to the minutes from the last FOMC meeting. Tomorrow brings us three of those releases, including the week’s least important. January’s Housing Starts will be posted early tomorrow morning, giving us an indication of housing sector strength and mortgage credit demand. It usually does not affect rates unless it varies greatly from forecasts. Current forecasts are calling for a decline in starts of new housing.

January’s Industrial Production da ta will be released mid-morning tomorrow. 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 1.4% decline in production from December to January. A larger than expected decline in output would be good news and should push bond prices higher, lowering mortgage rates tomorrow.

The minutes from last FOMC meeting will be released tomorrow afternoon. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading. However, with little likelihood of the Fed making a change to key short-term rates anytime soon, these minutes will likely not heavily influence trading or lead to a change in mortgage rates during afternoon trading.

Overall, the most important day of the week will likely be Friday with the CPI being released, but tomorrow and Thursday may also be active days for mortgage rates. There is a strong likelihood of seeing an active week for mortgage rates.

If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Lock Advisory – Tuesday Feb. 10th

Tuesday’s bond market has opened well into positive territory as last night’s speech by President Obama and his bank bailout plan are being received favorably. The stock markets are not reacting as well to the news with the Dow down 295 points and the Nasdaq down 49 points. The bond market is currently up 28/32, which should improve this morning’s mortgage rates by approximately .250 – .375 of a discount point.

Fed Chairman Bernanke will be speaking before the House Financial Services Committee at 1:00 PM ET today. He is expected to testify and update the panel on the Fed’s liquidity injections and future plans. His words could create movement in the markets and possibly mortgage pricing during afternoon trading. After this morning’s warm reception to the President’s plan, I don’t think that it is likely that we will have a negative reaction to Chairman Bernanke’s testimony.

However, this week begins the quarterly refunding or sales of government debt that has had traders so concerned about recently. We will likely see more volatility as the week goes on, and as the sales take place. A total of $67 billion in new debt is being sold this week, which had raised concern about demand for current debt already in the market. That is what has pressured bonds recently and helped drive mortgage rates higher. If the market can get by that stigma or concern, we could see mortgage rates rally in the coming weeks.

There was no relevant data scheduled for release this morning. Tomorrow brings us the first of this week’s three releases when the least important of them, December’s Goods and Services Trade Balance, will be posted. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates.

If I were considering financing/refinancing a home, I w ould…. Lock if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Lock Advisory – Sunday Dec. 14th

This week is moderately busy in terms of the number of economic releases scheduled for release with four on the agenda, but the biggest news will likely be the last Federal Open Market Committee (FOMC) meeting of the year Tuesday. Only one of the four economic reports is considered to be of high importance, so the data may not be the biggest influence eon the markets and mortgage rates this week.

November’s Industrial Production data is scheduled to be posted mid-morning tomorrow. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting this report to show a 0.5% decline in output. A larger than expected drop would be good news for bonds, while a stronger than expected reading may result in slightly higher mortgage pricing.

The week’s most important economic data comes Tuesday morning when November’s Consumer Price Index (CPI) is posted. It is similar to last week’ s Producer Price Index, except it tracks inflationary pressures at the consumer level of the economy. Current forecasts call for an decline of 1.3% in the overall index and a 0.1% rise in the core data reading. The core data is watched more closely because it excludes more volatile food and energy prices, giving a more stabile reading for analysts to consider.

November’s Housing Starts report will also be released Tuesday morning, but I don’t see it causing much movement in mortgage rates. This report, which is expected to show a decline in starts of new homes, gives us an indication of housing sector strength and future mortgage credit demand. But, it can be considered the least important of this week’s news.

The last FOMC meeting of the year is Tuesday and will adjourn at 2:15 PM ET. There is much debate about what the Fed will do at this meeting, but the general consensus is that another rate cut is coming. Some think that the Fed will r educe key short-term interest rates by another .750 of a discount point, but most think the Fed will make a half-point move and wait until early next year before making another change. The post meeting statement also may a significant influence on the markets and mortgage rates as investors look for any indication of what and when the Fed may do next.

The last piece of economic news will be posted Thursday morning with the release of the Conference Board’s Leading Economic Indicators (LEI) for the month of November. This 10:00 AM release attempts to measure economic activity over the next three to six months. It is expected to show a sizable decline in activity, meaning that it predicts slower economic activity over the next several months. This probably will not have much of an impact on bond prices or affect mortgage rates unless it exceeds current forecasts of a 0.5% decline from October’s reading. If it shows a larger decline, the bond market may move slightl y higher, improving mortgage rates slightly.

Overall, expect to see a pretty volatile week in the financial markets and mortgage pricing. The most important day of the week is certainly Tuesday with the CPI and the FOMC meeting both scheduled. However, we may see noticeable movement in rates more than one day this week, so, please maintain contact with your mortgage professional if you have not locked an interest rate yet.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.