June 1st, 2010 8:38 AM by Lehel S.
This holiday-shortened week brings us the release of five important economic reports for the markets to digest. Two of the five are considered to be of very high importance to the bond market and mortgage rates. The remaining reports are considered to be of moderate importance to the markets. The financial and mortgage markets will be closed tomorrow in observance of the Memorial Day holiday and will reopen Tuesday morning.
The Institute for Supply Management's (ISM) manufacturing index will be posted late Tuesday morning. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are expecting to see a 58.9 reading in this month's release, meaning that sentiment fell slightly during May. A smaller reading will be good news for the bond market and mortgage shoppers while an unexpected increase could c ontribute to higher mortgage rates Tuesday.
There is no relevant data scheduled for release Wednesday, making it the best candidate for the least important day of the week. This is no guarantee that we will not see a change in mortgage rates Wednesday, but it will likely be much less active than some of the other days.
The revised 1st Quarter Productivity and Costs data is the first of three reports that will be released Thursday morning. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation. It is believed that the economy can grow with low inflationary pressures when productivity is high. Last month's preliminary reading revealed a 3.6% increase, but I don't think this piece of data will have much of an impact on the bond market or mortgage pricing unless it varies greatly from its forecasted revised reading of 3.4%.
The second release of th e day will come from the Commerce Department, who will post April's Factory Orders data during late morning trading. This manufacturing sector report is similar to last week's Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn't expected to cause much change in rates this month. Current forecasts are calling for an increase in orders of 1.7%.
The third report of the day may have a noticeable impact on the markets or be a non-factor depending on its results. The Institute for Supply Management will release its services index late Thursday morning. It is expected to show a reading of 55.5, with the same principals as Tuesday's manufacturing index. If this reading varies greatly from forecasts, we may see volatility in the markets and mortgage rates. However, if its results are in the general area of expectations , it will likely have no influence on the markets and mortgage pricing Thursday.
Friday's sole report is arguably the single most important report that we see each month. The Labor Department will post May's Employment data early Friday morning. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate slip from 9.9% in April to 9.8% this month with approximately 500,000 jobs added to the economy during the month. A higher than expected unemployment rate and a smaller number than 500,000 in new payrolls would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates Friday. However, stronger than expected numbers may lead to a spike in mortgage rates Friday morning.
Overall, Tuesday or Friday are likely to be the most important days of the week as they bring us the tw o most important reports on the agenda. If they give us weaker than expected results, we could close the week with lower mortgage rates than Tuesday's opening levels. However, if we see stronger than expected readings in those two releases, I expect mortgage rates to move higher on the week. But that is very much dependant on seeing a relatively calm week in stocks. As we have seen the past two weeks, the overseas concerns and stock market volatility can heavily influence bond trading and mortgage rates and significantly minimize the impact that these economic reports normally have on rates. Accordingly, it would be wise to 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.