September 28th, 2009 7:39 AM by Lehel Szucs
This week brings us the release of six relevant economic reports for the bond market to digest. There is nothing of importance scheduled for release tomorrow, so look for the stock markets to influence bond trading and possibly mortgage rates. I would not be surprised to see a relatively calm day as traders prepare for this week's data, some of which is considered to be extremely important.
The first release of the week is September's Consumer Confidence Index (CCI) late Tuesday morning. This Conference Board index will be posted at 10:00 AM and gives us a measurement of consumer willingness to spend. It is expected to show an increase from last month's reading, indicating that consumers are more optimistic about their own financial situations than last month and more likely to make large purchases in the near future. This is bad news for the bond market and mortgage rates because consumer spending fuels economic growth. Analysts are calling for a reading of approximately 57.0, up from August's 54.1. If we see a larger than expected increase, the bond market should move lower and mortgage rates move higher Tuesday.
Wednesday's sole report is the final revision to the 2nd Quarter Gross Domestic Product (GDP). Since this data is aged now and the preliminary reading of the 3rd Quarter GDP will be released next month, I don't see this revision having much of an impact on the financial markets or mortgage pricing. It is expected to show a slight downward revision from the previous estimate of a 1.0% decline in GDP.
August's Personal Income and Outlays will be released early Thursday morning. It gives us an indication of consumer ability to spend and current spending habits. This is important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is negative news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. It is expected to show a 0.1% rise in income and a 1.1% increase in spending due to auto sales.
The Institute for Supply Management (ISM) will post their manufacturing index for September late Thursday morning. This index gives us an indication of manufacturer sentiment. Analysts are expecting an increase from last month's 52.9 reading. The 50.0 benchmark is extremely important because a reading above that level means more surveyed executives felt business improved than those who said it had worsened. This data is important not only because it measures manufacturer sentiment, but it is also very recent data. Some economic releases track data that are 30-60 days old, but the ISM index is only a few weeks old. If we get a smaller than expected reading, I expect to see the bond market rally and mortgage rates fall Thursday morning.
The Labor Department will post September's Employment report early Friday morning. This report will reveal the U.S. unemployment rate, number of new payrolls added or lost during the month and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.
If this report gives us weaker than expected readings Friday, bond prices should move higher and we should see lower mortgage rates Friday. However, stronger than forecasted readings could be disastrous for mortgage pricing. Analysts are expecting to see the unemployment rate at 9.8%, a decline in new payrolls of approximately 180,000 and a 0.2% increase in earnings.
The final report of the week comes late Fri day morning when the Commerce Department will post August's Factory Orders data. This manufacturing sector report is similar to last week's Durable Goods Orders release, but includes orders for non-durable goods. It can usually impact the financial markets enough to change mortgage rates slightly if it varies from forecasts by a wide margin, but due to the importance of the Employment report I doubt this data will heavily influence the markets. Current forecasts are calling for an increase in new orders of approximately 0.5%.
Overall, it is likely going to be a very active week in the markets and mortgage rates. The most important day will be Friday due to the employment report being scheduled, but Tuesday's and Thursday's data can also fairly heavily influence mortgage rates. With important data being released each day of the week except tomorrow, I would recommend maintaining contact with your mortgage professional.
If I were considering financing/re financing 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... 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.
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