February 21st, 2010 9:37 PM by Lehel S.
This week brings us the release of six pieces of economic data for the bond market to digest along with some very important testimony from Fed Chairman Bernanke. Two of the reports are considered to be of low importance, but since we have data being posted every day of the week except for tomorrow, it is likely that we will see plenty of movement in mortgage rates the next few days.
None of this week's economic data is scheduled for release tomorrow. We do, however, have Congressional testimony by Chairman Bernanke late tomorrow morning. He will be speaking to a House Financial committee about employment growth and whether further stimulus is needed. These are hot topics so his words may influence the markets and possibly mortgage rates.
Tuesday morning brings us the first of this week's data with the release of February's Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consum er confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show a decline in confidence from 55.9 in January to 55.0 this month. A lower reading would be considered good news for bonds and mortgage rates.
January's New Home Sales report will be posted late Wednesday morning. This is one of the least important reports of the week, and it is the sister report to Friday's Existing Home Sales release. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates. They are both expected to show an increase in sales.
Mr. Bernanke will deliver the Fed's semi-annual testimony on the status of the economy late Wednesday and Thursday mornings. He will be speak ing to the House Financial Services Committee Wednesday and the Senate Banking Committee Thursday. Market participants will watch the Fed Chairman's words very closely. He is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what he says during this testimony. Look for him to address the unemployment and housing crises specifically and their impact on the overall economy. His testimony begins at 10:00 AM ET with a prepared statement then is followed by Q & A with committee members. I am expecting to see the markets fluctuate during this session, possibly affecting mortgage rates also.
The only important data scheduled for release Thursday is January's Durable Goods Orders data. This data gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. A smaller increase than the 1.5% that is expected would be good news for the bond market and mortgage rates. This data is quite volatile from month-to-month, so large swings are fairly normal.
The first of two revisions to the 4th Quarter GDP reading is scheduled for release Friday morning. Analysts' forecasts currently call for an annual rate of growth of 5.6%, indicating that the economy was slightly weaker in the last quarter of the year than initially thought. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market, while a sizable downward revision would be good news and could lead to improvements in mortgage pricing.
The last piece of data scheduled for release this week is the University of Michigan's revision to their Index of Consumer Sentiment for February. Current forecasts show this index revising sligh tly higher than previously thought. The preliminary reading was 73.7 and is now expected to stand at 73.9, indicating that consumer sentiment was slightly stronger than previously thought. This index is fairly important because it helps us measure consumer confidence that translates into consumer willingness to spend.
In addition to this week's economic reports and Chairman Bernanke's speaking dates, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds tha t follows usually translates into lower mortgage rates.
Overall, look for plenty of movement in bond prices and mortgage rates this week. I think we will see the most movement either Wednesday or Thursday, but Friday may be fairly active also. This would be a very good week to maintain contact with your mortgage professional, especially 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.