March 22nd, 2010 12:11 PM by Lehel S.
This week brings us the release of five monthly and quarterly reports for the bond market to digest along with two relevant Treasury auctions. Two of the reports can be considered much less important than the others, but with mortgage-relevant events scheduled four out of the five days we will still likely see some movement in rates a couple days this week. Tomorrow is the only day of the week that there is not a relevant economic report scheduled for release or other event taking place that may affect mortgage rates.
The first report of the week is February's Existing Home Sales from the National Association of Realtors late Tuesday morning. It will give us a measurement of housing sector strength and mortgage credit demand, but is usually considered to be of low importance to the financial markets. Its' sister report- February's New Home Sales, will be posted Wednesday morning. Since it is Tuesday's only data, it may influence bond trading enough to cause a slight change in mortgage rates, but it will take a large variance from forecasts for it to heavily influence rates. Current forecasts have Tuesday's report showing a small decline in sales and Wednesday's data showing a minor increase in sales.
Wednesday's important data comes from the Commerce Department, who will post February's Durable Goods Orders. This report gives us a measurement of manufacturing sector strength by tracking new orders for big-ticket items, or products that are expected to last three or more years. This data is known to be volatile from month to month but is still considered to be of high importance. Analysts are expecting it to show an increase in new orders of approximately 0.5%. A larger increase would be considered negative for bonds as it would indicate economic strength and could lead to higher mortgage rates Wednesday morning.
The next relevant data is Friday's final revision to the 4th Quarter GDP. This is the second an d final revision to January's preliminary reading of the U.S. Gross Domestic Product, or the sum of all goods and services produced in the U.S. It is expected to show no change to the reading of 5.9% that was posted last month. Analysts are now more concerned with next month's preliminary reading of the 1st quarter than data from three to six months ago, so I don't expect this report to affect mortgage rates much.
The final report of the week comes from the University of Michigan at 9:45 AM ET Friday. Their revision to their March Consumer Sentiment Index will give us an indication of consumer confidence, which hints at consumers' willingness to spend. This is relevant because rising levels of confidence usually means consumers are more willing to make large purchases in the near future. That translates into fuel for economic growth. It is expected to show an increase from the preliminary reading of 72.5, meaning that surveyed consumers wer e more optimistic about their own financial situations than previously thought. Favorable results for bonds and mortgage rates would be a decline in confidence.
In addition to this week's economic reports, 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 that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.
Overall, it is d ifficult to label one particular day as the most important of the week. The single most important report will likely be the Durable Goods Orders, but none of the week's data has the potential to be a major market mover. If the stock markets move lower, we should see gains in bonds and improvements in mortgage rates. But, if stocks move higher, pressure in bonds is possible, leading to higher mortgage pricing. I suspect that this week will be a little calmer for mortgage rates than the past couple weeks have been, but I still recommend proceeding with caution if you are 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... 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.