June 14th, 2010 9:49 AM by Lehel S.
This week is fairly busy with five economic reports scheduled to be released. Two of the five are considered to be of high importance to the markets and mortgage rates. The remaining three are of interest to the markets but likely will not cause a large change in mortgage rates unless they vary greatly from forecasts. None of the relevant data is being posted tomorrow or Tuesday, so look for the stock markets to influence bond trading and mortgage rates again.
The first data of the week comes Wednesday when there are three reports scheduled to be posted. The day's reports are a broad spectrum of data ranging from housing figures to manufacturing output to an important inflation reading. Their importance to the markets also is a wide variety. The first report of the day is May's Housing Starts that tracks starts of new home projects. It is the week's least important report and likely will not affect mortgage rates unless its results vary gr eatly from the 2.8% decline that is expected.
The second is one of the two highly important reports of the week. May's Producer Price Index (PPI) will also be posted early Wednesday morning. It helps us measure inflationary pressures at the producer level of the economy. There are two readings of this index, the overall and the core data. The core data is considered to be the more important of the two because it excludes more volatile food and energy prices. A large increase could raise concern about inflation rising as soon as the economy gains some traction. This would not be good news for bond prices or mortgage rates since inflation erodes the value of a bond's future fixed interest payments. Rising inflation causes investors to sell bonds, driving prices lower and mortgage rates higher. Analysts are expecting to see a decline of 0.5% in the overall index and a 0.1% rise in the core data. It will not take much of a variance from forecasts for the markets to re act, which would most likely lead to changes in mortgage rates.
The third and final piece of data scheduled for Wednesday is May's Industrial Production. This report will be released at 9:15 AM ET and is considered to be moderately important. It measures output at U.S. factories, mines and utilities, giving us a fairly important measurement of manufacturing sector strength. If it reveals that production is rising, concerns of manufacturing strength may come into play in the bond market. A larger than expected 0.8% increase would indicate that the manufacturing sector is stronger than expected and would likely help push mortgage rates higher. That is assuming that the PPI doesn't surprise us.
There are two reports scheduled for release Thursday, but one of them is the week's most important and arguably the single most important report we see each month. That is May's Consumer Price Index (CPI). It is very similar to Wednesday's PPI, but measures inflat ionary pressures at the more important consumer level of the economy. It is expected to show a 0.2% drop in the overall reading and a 0.1% increase in the core data. A larger than expected increase in the core reading would most likely lead to a noticeable upward change to mortgage rates Thursday.
May's Leading Economic Indicators (LEI) will be posted late Thursday morning. The Conference Board, who is a New York-based business research group, will post this data. It attempts to predict economic activity over the next three to six months. Good news for mortgage rates would a decline in this index, but the CPI is much more important to the markets than this index. Therefore, if the CPI reveals any surprises, this data will likely have little impact on Thursday's mortgage rates. It is expected to show a 0.4% increase.
Overall, look for Wednesday to be the biggest day of the week. Not just because it brings the release of three of the five reports, but al so because it brings us the PPI that is considered to be a key inflation reading. Thursday is also very important with the CPI being posted, so look for the most movement in rates during the middle part of the week.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float 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.