July 19th, 2009 10:03 PM by Lehel Szucs
This week will be interesting for the bond market and mortgage rates. There are only three economic reports scheduled for the financial and mortgage markets to digest and none of them is considered to be of high importance to the markets. But in addition to the minimal economic data, we have two days of semi-annual congressional testimony by Fed Chairman Benanke. The first day of testimony has the potential to influence changes to mortgage rates more than many of the monthly or quarterly pieces of economic data do.
The first report of the week comes tomorrow morning with the release of June's Leading Economic Indicators (LEI) at 10:00 AM. This Conference Board index attempts to measure economic activity over the next three to six months. While it is not a factual report, it still is considered to be of relative importance to the bond market. It is expected to show a 0.5% increase, meaning that we may see noticeable increase in economic activity over the next few months. A decline in the index would be good news for the bond and mortgage markets.
Fed Chairman Bernanke will speak before the House Financial Services Committee Tuesday morning and the Senate Banking Committee Wednesday morning at 10:00am ET. His testimony will be broadcasted and will be watched very closely. Analysts and traders will be looking for the status of the economy and his expectations of future growth, particularly inflation concerns. This should create a great deal of volatility in the markets during the testimony and the question and answer session that follows. If he indicates that inflation is a point of concern, we will likely see the bond market tank and mortgage rates rise. We usually see the most movement in rates during the first day of testimony as the Chairman's prepared words for both appearances are quite similar to each other, meaning that the second day of testimony rarely gives us anything we did not hear during the first day.The National Association of Realtors will post June's Existing Home Sales figures during late morning hours Thursday. This report gives us a measurement of housing sector strength and mortgage credit demand, but it is not considered highly important and often has a minimal impact on mortgage rates. Current forecasts are calling for a slight increase from May's sales totals. A smaller than expected increase or a decline in sales would be considered good news for bonds and mortgage rates because a weak housing sector would make it difficult for the economy to recover anytime soon. However, unless this data varies greatly from forecasts it probably will not lead to much of a change in rates.
Friday's only relevant economic data is the final revision to July's University of Michigan Index of Consumer Sentiment that will help us measure consumer optimism about their own financial situations. This is important because rising consumer confidence means that consumers may be apt to make large purchases in the near future. This adds fuel to the economic recovery and is looked at as bad news for bonds. It is an update to the preliminary reading we saw two weeks ago, so unless we see a drastic revision to the preliminary estimate, I think the markets will probably shrug this news off.
Overall, this is a moderately significant week for the bond market and mortgage rates. If we get weaker than expected economic results and Chairman Bernanke's words do not surprise the markets, we may see mortgage rates move lower for the week. However, if Mr. Bernanke's testimony raises inflation concerns- rates may again move higher on the week.
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... 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 2009