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Mortgage Rates (4/19/2010 - The Week Ahead)

April 19th, 2010 8:14 AM by Lehel S.

This week is moderately active in terms of economic news scheduled for release. There are five reports scheduled, but only two of them carry the potential to cause noticeable movement in mortgage rates. Accordingly, there is a decent possibility of seeing a relatively calm week in the mortgage market, assuming that the stock markets do the same.

The week's first data comes late tomorrow morning when the Conference Board will release their Leading Economic Indicators (LEI) for March. This data attempts to measure economic activity over the next three to six months. This is considered to be a moderately important report, so we may see a slight movement in rates as a result of this report. It is expected to show an increase of 1.0%, meaning it is predicting rapid growth in economic activity of the next several months. A much smaller than expected increase would be considered good news for the bond market and could lead to slightly lower mortgage rates tomorrow.< br />
There is no relevant data scheduled for release Tuesday or Wednesday. The next report comes early Thursday morning when the Labor Department will post March's Producer Price Index (PPI). It will give us an important measurement of inflationary pressures at the producer level of the economy. There are two portions of the report that analysts watch- the overall reading and the core data reading. The core data is more important to market participants because it excludes more volatile food and energy prices. If it shows rapidly rising prices, inflation fears may hurt bond prices since it erodes the value of a bond's future fixed interest payments, leading to higher mortgage rates. However, a slight increase, or better yet a decline in prices, would be good news for the bond market and mortgage rates. Current forecasts are calling for a 0.5% increase in the overall reading and a 0.1% rise in the core data.

Also Thursday, the National Association of Realtor s will post March's Existing Homes Sales numbers. A similar report to this one and actually the week's least important data- March's New Home Sales will be released Friday morning. Both of these releases give us an indication of housing sector strength and mortgage credit demand, but unless they vary greatly from analysts' forecasts, I don't think they will cause much movement in mortgage rates. Both are expected to show increases from February's levels.

March's Durable Goods Orders will be released early Friday morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Current forecasts are calling for an increase in new orders of 0.2%. This would be a sign of slight manufacturing sector growth, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A decline would be considered good news, while a large increase would indicate manufacturing sector strength. The latter could lead to higher mortgage rates Friday.

Overall, look for Thursday or Friday to be the most important day of the week with the PPI and Durable Goods reports being posted. The rest of the week will likely be heavily influenced by the stock markets. If the major stock indexes rally, bonds will likely suffer and mortgage rates will move higher. If stocks extend last Friday's fall, we could see mortgage rates move lower the next few days.

If I were considering financing/refinancing a home, I would.... Float 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.

Posted in:General
Posted by Lehel S. on April 19th, 2010 8:14 AM

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