April 6th, 2009 7:57 AM by Lehel Szucs
This holiday-shortened week brings us the release of little relevant economic data for the markets to digest. We will, however, see the minutes from the last FOMC meeting and have a couple of Treasury auctions to watch. There is only one monthly economic report on tap this week and is one of the least important reports posted each month.
There is nothing of relevance scheduled for tomorrow. There is no relevant news scheduled until Wednesday afternoon when the FOMC minutes will be released. Market participants will be looking at these minutes closely. They give us insight to the Fed's current thought process and individual Fed member opinions. Any surprises in the 2:00 PM ET release could cause afternoon volatility in the markets Wednesday and possible changes in mortgage pricing.
The two Treasury auctions are scheduled for Tuesday and Thursday. There is a 10-year Treasury Inflation Protected Security (TIPS) sale Tuesday and a regular 10-year Not e sale Thursday. We could see some weakness in bonds ahead of the sales as investing firms sell current holdings to prepare for them. This weakness is usually only temporary if the sales are met with a decent demand. The results of the auctions will be posted at 1:00 PM ET each day. If the demand from investors was strong, the bond market could rally during afternoon trading, leading to lower mortgage rates. If the sales were met with a poor demand, the afternoon weakness may cause upward revisions to mortgage pricing Tuesday and/or Thursday afternoon.
The only piece of monthly data is February's Goods and Service Trade Balance report Thursday morning. This data gives us the size of the U.S. trade deficit, but unless it varies greatly from forecasts, it likely will not cause much movement in mortgage rates.
Overall, I am proceeding into this week very cautiously. There are several variables that could make this week very quiet or quite rocky for mortg age shoppers. Wednesday's FOMC minutes could very well be a major market mover or a complete non-factor. The same goes for Thursday's auction (Tuesday's sale will probably have less influence on the markets than Thursday's). In addition, the bond market will close early Thursday and remain closed until Monday in observance of the Good Friday holiday. This could lead to some additional volatility as traders look to protect themselves over the long weekend.
In other words, we may have a very calm week ahead of us, or we may see rates move noticeably several days. With no important economic data to drive trading and mortgage rates, bonds may move with stocks. This means large stock gains could lead to bond selling and higher mortgage rates. But stock weakness could lead to mortgage pricing improving for the week. Regardless, a lack of economic data is not reason to let our guard down if still floating an interest rate. Watch the market closely and proceed cauti ously if not locked yet.
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.
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