February 7th, 2010 7:26 PM by Lehel S.
There are only three pieces of relevant economic data scheduled to be posted this week along with a couple of Treasury auctions. Only one of the three reports is considered to be of high importance while one is moderately important. The third is not considered to be of much importance unless it varies greatly from forecasts.
None of the economic reports will be posted tomorrow or Tuesday. The first report comes Wednesday morning and is the least important of the three. That is when December's Goods and Services Trade Balance data will be posted. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates. It is expected to show a $35.0 billion trade deficit.
The most important data of the week is Thursday's release of January's Retail Sales data. This report is very important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched quite closely. If Thursday's report reveals weaker than expected sales, the bond market should thrive and mortgage rates will fall. However, a stronger reading than the 0.4% increase that is expected could lead to higher mortgage rates.
February's preliminary reading to the University of Michigan Index of Consumer Sentiment will be released late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows an increase in consumer confidence, the stock markets may move higher and bond prices could fall. It is currently expected to rise slightly from January's final reading of 74.4 to 74.8 for this month.
The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important one as it will give us an indication for demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would likely result in upward revisions to mortgage rates.
Overall, look for Thursday to be the most important of the day of the week due to the importance of the Retail Sales report. But, I suspect that we may see movement in mortgage rates several days this week. I am still holding a cautious approach stance towards mortgage rates and believe that the risk of floating a rate outweighs the potential gains. Therefore, please be careful if still floating an interest rate this week.
If I were considering financing/refinancing a home, I wo uld.... 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... 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.