September 7th, 2009 7:13 PM by Lehel Szucs
This week brings us the release of only three pieces of economic data, but none of them are considered to be highly important. In addition to the economic releases, we also have two Treasury auctions that may play a role in this week's mortgage pricing. The markets are closed tomorrow in observance of the Labor Day holiday, meaning mortgage lenders will follow suit.
The first release of the week comes Wednesday afternoon. The Federal Reserve will release its Beige Book report at 2:00 PM ET Wednesday. This report details current economic conditions in the U.S. by region. It is believed to be a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed's next move. Most likely though, it will be a non-event and will not lead to a noticeable change in mortgage rates.
Also Wednesday is the 10-year Treasury Note auction, which will be followed by the 30-year Bond auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. But, if the sales are met with a decent demand from investors, those losses are normally recovered after the results are announced. The results will be posted at 1:00 pm ET each day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading Wednesday and Thursday.
July's Goods and Services Trade Balance data will be posted early Thursday morning, giving us the size of the U.S. trade deficit. It is expected to show a deficit of approximately $27.4 billion, which would be a small increase from June's $27.0 billion. However, I would consider this the least important of this week's releases, meaning it will likely have little impact on bond trading or mortgage rates regardless of its results.
The last report of the week will be posted by the University of Michigan. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which hints at consumers' willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial situations, they probably will delay making that large purchase. This influences future consumer spending data and can impact the financial markets. It is expected to show a reading of 67.8 that would mean confidence rose from August's final reading. That would be considered bad news for bonds and mortgage rates.
Overall, this week looks like it will be much less active for mortgage rates than last week was. With the financial markets closed tomorrow, we only have four days of trading. There is no particular data that is important enough to label its day of release as the mo st important of the week. This may allow the stock markets to heavily influence bond trading and therefore, impact mortgage rates this week. As long as the stock markets do not stage a sizable rally or sell-off this week, I believe we will only see minor changes to mortgage rates the next few days.
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