December 1st, 2008 10:17 AM by Lehel Szucs
There are five pieces of economic news that may affect mortgage rates this week. There are relevant reports scheduled for release every day except for Tuesday, meaning it likely will be a fairly active week for mortgage rates.
November's manufacturing index from the Institute for Supply Management (ISM) will kick off the week's data at 10:00 AM ET tomorrow. 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 38.9. A weaker reading than the expected 38.0 would be good news for the bond market and mortgage rates. A reading below 50 means that more surveyed trade executives felt business worsened during the month than those who felt it had improved. That is a recessionary sign and could help keep mortgage rates low.
The next piece of data that we need to be conce rned with comes Wednesday morning with the release of the revised 3rd Quarter Productivity report. This index is expected to show a downward 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 is the conditions around economic growth, such as inflation that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 0.9%, down from the previous estimate of 1.1%.
The Fed Beige Book will be posted Wednesday afternoon. This report, which is named after the color of its cover, details economic conditions by region. It is relied on heavily during the FOMC meetings when determining monetary policy, so it results can influence bond trading and mortgage rates if it shows any significant su rprises.
Thursday's only report of the day is October's Factory Orders. This report is similar to last week's Durable Goods Orders release except that this one includes orders for both durable and non-durable goods. This data usually isn't a major influence on bond trading, but we may see it cause some movement in mortgage rates if it varies greatly from forecasts. Analysts are expecting to see a drop in orders of approximately 2.5%.
The Labor Department will post November's Employment report early Friday morning. This is arguably the most important monthly report we see. It is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for another upward change in the unemployment rate to 6.8%, payrolls down approximately 300,000 and an increase of 0.2% in average earnings. An ideal scenario for mortgage sho ppers would be a higher unemployment rate than 6.8%, a larger decline in jobs and no change in the earnings portion.
Overall, the most important day of the week is Friday with the employment figures being released, but we may also see movement in rates Monday and Wednesday. The remaining days could be fairly quiet, depending on stock market gains or losses. Friday's data could cause a significant change in rates, but if it reveals stronger than expected results we may see rates spike higher Friday morning. Ahead of the report, we may see pressure in bonds as investors prepare for its release. Accordingly, I am holding the lock recommendations for short and intermediate-term periods.
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 pla ce 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 2008