May 16th, 2010 4:04 PM by Lehel S.
This week brings us the release of four pieces of relevant economic news in addition to the minutes from the most recent FOMC meeting. Two of the economic reports are considered to be highly important to the markets and mortgage rates, so we likely will see more movement in rates again this week.
Nothing of importance is scheduled for tomorrow, so look for the stock markets to be a major influence on bond trading and mortgage pricing. If the stock markets open the week with sizable gains, bonds will likely suffer and mortgage rates will probably move higher tomorrow. However, more stock weakness should translate into slightly lower rates tomorrow.
The first report of the week is April's Producer Price Index (PPI) early Tuesday morning, which helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer l evel, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.1%, while the core data that excludes more volatile food and energy prices is also expected to rise 0.1%. No change or a decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds.
April's Housing Starts will also be posted early tomorrow morning, but is much less important than the PPI readings are. This data measures housing sector strength and mortgage credit demand by tracking new permits and actual starts of new home construction. It is expected to show an increase in new starts from March's readings. Since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts and the PPI matches forecasts.
Wednesday's only economic data is Apr il's Consumer Price Index (CPI) at 8:30 AM ET. It is similar to Tuesday's PPI report, but measures inflationary pressures at the more important consumer level of the economy. Its' results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing. Current forecasts are calling for a 0.1% increase in the overall index and no change in the core data reading. As with the PPI, the core data is the more important of the two readings.
Also Wednesday will be the release of the minutes from the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy. The goal is to form opinions about when the Fed may make a move to key short-term interest rates. The minutes will be released at 2:00 PM ET, so if there is a market reaction to them it will be evident during afternoon trading.
The last data comes late Thursday morning with the release of April's Leading Economic Indicators (LEI) at 10:00 AM ET. This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show a 0.2% increase from March's reading, meaning that economic activity is likely rise slightly during the next few months. A decline would be good news for the bond market and mortgage rates, while a larger increase could cause mortgage rates to inch higher Thursday.
Overall, it appears it is going to be another active week for the mortgage market. We have two inflation readings that are very important to the bond market the middle part of the week. Stock market volatility will likely also affect bond trading again this week, so we may see movement in rates several days. Wednesday's CPI is the single most important report of the week, but Tuesday's PPI can also heavily influence the bond market. If the stock markets remain fairly calm, I wou ld guess the middle part of the week will probably be the most important for mortgage pricing. However, sizable gains or losses in the major stock indexes could influence bonds and mortgage rates as much as this week's economic data can. Therefore, this is another week that it is highly recommended you maintain contact with your mortgage professional 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.