October 19th, 2009 8:27 AM by Lehel S.
This week brings us the release of five economic reports for the markets to digest. Only one of these reports is considered to be highly important to mortgage rates, but this by no means leads me to believe we will have an uneventful week. This will be an extremely busy week for corporate earnings, which usually translates into stock volatility. The lack of important economic data on this week's calendar makes it more likely that any significant swings in stock prices will influence bond trading and mortgage rates.
There is nothing of importance scheduled to be posted tomorrow morning. We will get a couple of important earnings releases including Texas Instruments and Apple, Inc, but they are being announced after the markets close tomorrow. This means that any reaction in the markets won't come until Tuesday's trading. I am thinking that tomorrow may end up being one of the calmer days for mortgage rates.
September's Producer Price Index (P PI) is the first report of the week and the most important of the five. This index measures inflationary pressures at the producer level of the economy. Analysts are expecting to see no change 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 fuel inflation concerns in the bond market and push mortgage rates higher. However, weaker than expected readings should lead to lower rates Tuesday.
September's Housing Starts is the second report of the day, but is one of the week's least important pieces of data. It gives us an indication of housing sector strength and mortgage credit demand, but usually is not a mover of mortgage rates. It is expected to show an increase in starts of new homes last month. If it varies greatly from forecasts, we could see the bond market have some reaction to the news, but probably not enough to cause much movement in rates. The PPI report should be much more of an influence on mortgage rates Tuesday than this housing report will.
The only data scheduled for release Wednesday comes during afternoon trading when the Federal Reserve will release its Beige Book at 2:00 PM ET. This data details economic conditions throughout the U.S. by region. It is relied upon heavily by the Federal Reserve during their FOMC meetings when determining monetary policy. If it reveals stronger signs of inflation or economic growth from the last release, we could see mortgage rates revise higher shortly after its release.
The next report is September's Leading Economic Indicators (LEI) late Thursday 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 0.9% from August?s reading. This would indicate that economic activity is likely to increase fairly rapidly. That would be bad news for the bond market and mortgage rates, but this report is considered to be only moderately important.
September's Existing Home Sales will be posted at 10:00 AM ET Friday. 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 an increase in sales from August to September.
Overall, look for Tuesday to be the most important day of the week with the PPI being posted. However, if we see a significant rally or sell-off in stocks any particular day, it may end up bringing us the biggest single day change in mortgage pricing. The negative tone in bonds over the past two weeks may be subsiding somewhat, but I believe we s till need to remain cautious towards mortgage rates. If the corporate earnings releases are generally weaker than forecasts, I may change to a less conservative stance. But until there is some strong evidence that the worst may be behind us, it is prudent to proceed cautiously if still floating an interest rate.
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.
©Mortgage Commentary 2009