May 24th, 2010 10:45 AM by Lehel S.
This week brings us the release of seven important economic reports or news releases in addition to two Treasury auctions that may influence rates. Three of the seven are considered to be of fairly high importance to the bond market and mortgage pricing. The remaining reports are considered to be of moderate or low importance to the markets.
The National Association of Realtors will give us the Existing Home Sales report late tomorrow morning. This data tracks resales of homes in the U.S. during April, giving us a measurement of housing sector strength. However, it is not considered to be of much importance to the bond market unless it varies greatly from forecasts. Current forecasts are calling for a moderate increase in sales between March and April.
The Conference Board will start the week's more important releases by posting their Consumer Confidence Index (CCI) at 10:00 AM Tuesday. This is one of the more important releases of the week because is measures consumer willingness to spend. If the index rises, it indicates that consumers feel better about their personal financial situations and are more apt to make large purchases. If confidence is sliding, analysts think consumer spending may slow in the near future. The latter is good news for the bond market because consumer spending makes up two-thirds of the U.S. economy. A decline should boost bond prices and push mortgage rates lower Tuesday morning. It is expected to show a reading of 58.3 after April's 57.9 reading.
We will get two monthly reports Wednesday morning. The more important of the two is April's Durable Goods Orders data. This report gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. It is currently expected to show an increase in new orders of approximately 1.4%. If this report shows a larger than expected rise, we should see mortgage rates move highe r because it indicates manufacturing growth. If it shows a smaller than expected increase, we could see rates improve Wednesday.
April's New Home Sales data will be released late Wednesday morning. This report gives us a measurement of housing sector strength and future mortgage credit demand. However, it is actually the least important release of the week and probably will not have much of an impact on mortgage pricing. It is expected to show an increase in sales.
The first of two revisions to the 1st quarter Gross Domestic Product (GDP) will be released at 8:30 AM Thursday. The second revision to this report comes next month but isn't expected to have much of an impact on the financial markets. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best indicator of economic growth. Last month's preliminary reading revealed a 3.2% increase in the annual rate of growth. Analysts expect a sligh t upward revision to this reading with the consensus being a 3.3% rate of growth. If the upward revision is much stronger than expected, we may see the bond market react negatively and mortgage rates move higher.
April's Personal Income and Outlays data is the first of two reports due Friday. It will be posted at 8:30 AM and gives us an indication of consumer ability to spend and current spending habits. An increase in income means that consumers have more money available to spend. Since consumer spending makes up two-thirds of the U.S. economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.4% increase in income and a 0.3% rise in spending. Weaker readings would be considered good news for bonds and mortgage rates.
The second report of the day and the last relevant data of the week will come from the University of Michigan who will update their Index of Consumer Sentimen t for May. It is forecasted to show a small increase from this month's preliminary reading of 73.3. A reading above 73.7 would be considered negative for bonds.
Overall, I think we have a busy week ahead of us. The big reports of the week are Tuesday's CCI and Wednesday's Durable Goods Orders. If Thursday's GDP revision varies greatly from forecasts, it can also lead to sizable changes in rates. There are also a couple of Treasury auctions that are worth noting. The 5-year Note sale is Wednesday and the 7-year Note auction on Thursday may influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors.
The bond market will close early Friday afternoon ahead of next Monday's Memorial Day holiday. There is a pretty good possibility of seeing mortgage rates change several times this week, especially if there is more volatility in the stock markets, so ple ase proceed extremely cautiously 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.