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Mortgage Rates (12/26/2010 - The Week Ahead)

December 26th, 2010 9:08 PM by Lehel S.

This week brings us the release of only one piece of monthly economic data that is considered important to mortgage rates, in addition to two relatively important Treasury auctions. It is somewhat of another holiday-shortened week with the bond market closing early Friday in recognition of the New Years Day holiday. However, many traders will not be working Friday, so we can expect to see a very light day of trading.

There is no relevant news scheduled for release tomorrow. Look for any significant changes in stocks to drive bond trading and mortgage rates. If the major stock indexes remain fairly calm, it is possible that bond prices and mortgage rates may follow suit. Stock strength may lead to bond weakness and higher mortgage rates while stock selling should boost bonds and improve mortgage pricing.

The week’s only and the year’s final important release comes late Tuesday morning when the Conference Board will post their Consumer Co nfidence Index (CCI) for December. This is a pretty important release because it measures consumer willingness to spend. If consumers are more confident in their personal financial situations, they are more apt to make large purchases. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely by market participants and can have a significant influence on mortgage rate direction. Current forecasts are calling for an increase in confidence from November’s reading of 54.1. Analysts are expecting Tuesday’s release to show a reading of 56.1. The lower the reading, the better the news for bonds and mortgage pricing.

This week also has Treasury auctions scheduled the first three days. The two that are most likely to influence mortgage rates are Tuesday’s 5-year and Wednesday’s 7-year Note sales. If those sales are met with a strong demand, particularly Wednesday’s auction, bond prices may rise duri ng afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor demand may create bond selling and upward revisions to mortgage rates.

With little economic data being posted this week, the Labor Department’s weekly unemployment numbers may help influence the markets and mortgage rates more than usual. They are expected to show Thursday that 416,000 new claims for unemployment benefits were filed last week, which would be a small decline from the previous week. We usually don’t worry too much about this data because it tracks only a single week’s worth of new claims, but we should probably pay a little more attention to this particular release as it could impact mortgage rates slightly.

The bond market will close at 2:00 PM ET Friday and will reopen Monday for regular hours. The stock markets will not be recognizing the holiday with regular trading hours both Friday and Monday. Therefore, it is possible to see late afternoon changes to rates Friday if the stock markets make a big move upward or downward. Although I suspect we will see a fairly quiet afternoon as bond market participants and many stock traders head home early for the holiday.





Overall, Tuesday will be the most important day of the week, but we may see some volatility any day. The thin trading that we will probably see the latter part of the week often creates larger than usual fluctuations in the major indexes. Despite last week’s shortened schedule, we saw plenty of movement in mortgage rates. This week likely will be the same as investors look to make year-end adjustments to their portfolios. Accordingly, I recommend keeping in contact with your mortgage professional if still floating an interest rate and closing in the immediate future.

If I were considering financing/refinanci ng 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. 
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Posted by Lehel S. on December 26th, 2010 9:08 PM

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