July 7th, 2008 9:38 AM by Lehel Szucs
This week brings us the release of only two economic reports for the bond market to digest. It also is the beginning of corporate earnings season. Those quarterly earnings reports can lead to significant volatility in the stock markets, which could influence bond trading and mortgage rates.
The first piece of economic news that may affect mortgage rates is Thursday's weekly unemployment figures from the Labor Department. Analysts will be paying a little more attention to this week's release than usual because last week's report showed that claims had crossed above 400,000 the previous week. This is an important benchmark that will be watched closely. Last week's numbers didn't get much attention because they were posted at the same time as June's monthly Employment report. But with little data scheduled for release this week, I believe more focus will be made on Thursday's report.
Both of the week's monthly economic reports are scheduled to be p osted Friday morning. The first is May's Goods and Services Trade Balance report early Friday morning, which measures the size of the U.S. trade deficit. This data is not considered to be of high importance to the bond market and will not likely have an impact on mortgage rates. However, if it does vary greatly from analysts' forecasts of a $62.1 billion deficit, we may see some movement in bond prices and therefore possibly mortgage pricing.
The second is the University of Michigan's Index of Consumer Sentiment that is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary reading for July will be posted late Friday morning and is expected to fall slightly from June's final reading of 56.4. This would indicate that consumers were a little less comfortable with their own financial situations this month than last month. It is believed that if consumers are confident in their own finances, they are more a pt to make large purchases in the near future. And with consumer spending making up two-thirds of our economy, investors pay close attention to reports such as these.
Also worth mentioning are a couple of public speeches by Fed members including Fed Chairman Bernanke and a 10-year Treasury auction of inflation protected notes. The speeches will be watched closely for any possible hint of the Fed's next move. The Treasury auction likely will not have an impact on rates, but could influence bond trading slightly if it is met with a strong or weak demand from investors. In a very light week of economic news such as this week is, events like these sometimes have a greater impact on the markets than if they took place during a busy week of news.
Overall, I am expecting to see a fairly calm week in mortgage rates. Friday will be the most important day with the two reports scheduled for release. If the corporate earnings reports that are scheduled for this week are a disappointment, we could see stocks move lower and investors seek safe-haven in bonds. This would likely help push bond prices higher and mortgage rates lower for 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.