May 27th, 2008 3:18 PM by Lehel Szucs
This holiday shortened week brings us the release of six important economic reports or news releases. Two of the six are considered to be of high importance to the bond market and mortgage pricing with one being of low importance. The remaining reports are considered to be of moderate importance to the markets. The financial and mortgage markets are closed tomorrow in observance of the Memorial Day holiday and will reopen Tuesday morning.
The Conference Board will start the week's releases by posting their Consumer Confidence Index (CCI) at 10:00 AM Tuesday. This is a very important release that 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 it should ease concerns about inflationary pr essures, making bonds more attractive to investors. This should boost bond prices and push mortgage rates lower Tuesday morning. It is expected to show a reading of 61.0 after April's 62.3 reading.
April's New Home Sales data will be released late Tuesday 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 another decline in sales.
Wednesday morning we will see 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 a decline in new orders of approximately 0.7%. If this report shows a stronger than expected reading, we should see mortgage rates rise because it indicates manufacturing growth. If it shows a large r than expected drop, we should see rates improve Wednesday morning.
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 0.6% annual rate of growth. Analysts expect an upward revision to this reading with the consensus being a .9% annual rate. If true, we may see the bond market react negatively and mortgage rates move higher.
Friday brings us the release of two pieces of data with the first being April's Personal Income and Outlays data at 8:30 AM. This report 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% rise in income and a 0.4% increase in spending. Weaker readings would be considered good news for bonds and mortgage rates.
The last report of the day and the last important data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. An upward revision would be considered a negative for bonds.
Overall, I think we have a busy week ahead of us. With the markets closed tomorrow, Tuesday's data will set the tone for the first part of the week. The big reports of the week are Tuesday's CCI and Wednesday's Durable Goods. If Thursday's GDP revision varies greatly from forecasts, it can also lead to sizable changes in rates.
If I were considering financing/refinanc ing 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.
©Mortgage Commentary 2008