January 4th, 2010 9:34 AM by Lehel S.
This week bring us the release of only three monthly reports that are relevant to the bond market and mortgage rates, but two of them are considered to be highly important. In addition to those three reports, we also will get the minutes from the last FOMC meeting that may influence the markets and possibly mortgage rates.
The first report is the Institute for Supply Management's (ISM) manufacturing index for December late tomorrow morning. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. That indicates manufacturing sector strength rather than contraction. Analysts are currently expecting to see a 54.0 reading in this month's release, meaning that sentiment rose slightly from November's 53.6. A smaller reading will be good news for the bond market and mortgage shoppers while a higher than expected reading could lead to higher mortgage rates tomorrow morning.
The Commerce Department will post November's Factory Orders data late Tuesday 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 late last week, 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 electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see an increase of 0.5% 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. The smaller the increase, the better the news for mortgage rates.
Wednesday's only relevant news is the release of the minutes from the last FOMC meeting. This will give market participants ins ight to the Fed's thinking and concerns regarding 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 shouldn't affect the markets or mortgage rates until afternoon hours.
The final report of the week comes Friday morning when the Labor Department will post December's employment figures. The Employment report is considered to be one of the most important monthly releases 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 larger than expected drop in new payrolls and a small increase or even a decline in earnings would be good news for the bond market.
Current forecasts call for a 0.1% increase in the unemployment ra te, pushing it to 10.1%. Analysts are expecting to see little change in payrolls from November's payrolls with earnings rising 0.2%. If we see weaker than expected results, mortgage rates should improve Friday. However, stronger than expected readings will likely push mortgage rates higher.
Overall, the key data of the week will be Friday's Employment report, but look for tomorrow and Wednesday to be important due to the economic data and FOMC minutes scheduled. If they give us favorable results, mortgage rates will likely move lower for the week. But if not, we will probably see mortgage rates move higher.
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.