May 10th, 2010 7:40 AM by Lehel S.
There are four pieces of relevant economic news scheduled for release this week in addition to two important Treasury auctions, but one report stands out above the others. The four reports will be posted over two days, meaning the markets will have to rely on factors others than economic news for direction several days. There is no relevant data due tomorrow or Tuesday, so expect the stock markets to help drive bond trading and mortgage rates those days.
March's Goods and Services Trade Balance report will be released early Wednesday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $40.0 billion trade deficit, but it is the least important of this week's data and likely will have little impact on Wednesday's mortgage rates.
The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the a uctions will be posted at 1:30 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sale could lead to higher mortgage pricing those afternoons.
The remaining three economic reports will be released Friday morning. The first is the most important piece of data of the week. April's Retail Sales will be released at 8:30 AM ET. It is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.2% increase in sales from March to April. A weaker than expected level of sales should push bond prices higher and mortgage rates lower Friday morning. However, a larger increase could fuel fears of economic growth that would l ead to bond selling and higher mortgage rates.
The second report of the day is April's Industrial Production. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.6% increase in production, indicating that manufacturing activity is growing. A smaller than expected increase in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought.
The last report of the week is May's preliminary reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer willingness to spend, which relates to the importance of consumer spending. This report usually has a moderate impact on the financial markets though. It is expected to show a reading of 73.5, which would be a little higher than last month's final reading. If it shows a decline in consumer confidence, bond prices c ould rise and mortgage rates would move slightly lower, assuming the Retail Sales data does not give us a significant surprise.
Overall, it likely will be another active week for mortgage rates, but probably not as much as last week was. Besides the week's important economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Friday with three reports on the agenda, including the sales data. But I would not be surprised to see a particularly active day tomorrow, especially if the stock markets post sizable gains or losses. Accordingly, please be attentive to the markets 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 o ver 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.