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This week brings us the release of four monthly reports for the bond market
to digest, but none of them are considered to be highly important. In
addition to the economic reports, we also have a Fed-filled day in the
middle part of the week. With none of the reports likely to move the
markets, we could see a couple fairly calm days in mortgage rates.
There is nothing of importance scheduled for release tomorrow, so look for
the stock markets and overseas news to be the biggest influences on bond
trading and mortgage rates. News about a potential bailout for Cyprus and
some unprecedented requirements that are being considered could help push
stocks lower tomorrow. As word spread about a potential tax on deposit
accounts there, many people rushed ATM’s to get cash out over the weekend.
Even though Cyprus’s President addressed the nation to calm fears, the news
is expected to drag down international stock markets when they open for
trading. That should bode well for the bond market as investors may look
towards bonds as safety from any volatility. And what is good for the bond
market is generally good news for mortgage shoppers.
Two of the week’s four reports that are scheduled give us insights into the
housing sector. They begin early Tuesday morning when February's Housing
Starts will be posted. This report tracks construction starts of new
housing. It doesn't usually cause much movement in mortgage rates and is
considered one of the less important reports we see each month. It is
expected to show an increase in housing starts, indicating growth in the
housing sector. Good news for the bond market and mortgage rates would be a
sizable decline in new starts, but unless we see a large variance from
forecasts the data likely will not lead to a noticeable move in mortgage
pricing.
Wednesday is the day with several Fed events scheduled. They start with the
2:00 PM ET adjournment of the FOMC meeting that began Tuesday. It is widely
expected that Mr. Bernanke and company will not change key short-term
interest rates at this meeting, but there is rising concern in the market
that the Fed may cut back their current bond-buying program (QE3) to help
ease future issues. Any word on this topic either way could heavily influence
the markets and mortgage rates.
Also worth noting is that the FOMC meeting is ending a little earlier than
the traditional 2:15 PM because it is one of the meetings that will be
followed by a press conference with Fed Chairman Bernanke. The meeting will
adjourn at 2:00 PM while the press conference will begin at 2:30 PM and
will probably lead to afternoon volatility in the markets and mortgage
rates Wednesday. The Fed will also update their economic and monetary
policy projections at 2:00 PM. Any significant revisions to the Fed's
outlook on unemployment, GDP growth or their timetable for keeping key
rates at current levels will also cause volatility in the markets and
mortgage rates.
February's Existing Home Sales will be posted late Thursday morning by the
National Association of Realtors. It will also give us a measurement of
housing sector strength and mortgage credit demand. It is expected to
reveal an increase in home resales, meaning the housing sector strengthened
last month. Ideally, bond traders would prefer to see a decline in sales,
pointing towards a still weakening housing sector. However, a small
increase is expected, so it shouldn't cause much alarm in the bond and
mortgage markets. Bad news would be a sizable increase in sales, indicating
that the housing sector is gaining momentum. That could be troublesome for
the bond market and mortgage rates because housing and unemployment were
the two biggest hurdles the economy had to overcome. Recent reports have
some traders much more optimistic about the employment sector, so
overwhelmingly strong housing news could lead to another rise in mortgage
rates.
The Conference Board will post its Leading Economic Indicators (LEI) for
February late Thursday morning also. This index attempts to measure
economic activity over the next three to six months. It is considered to be
moderately important, but likely will not have a significant impact on
mortgage rates. Current forecasts are calling for a 0.5% increase, meaning
it is predicting that economic activity will likely expand moderately in
the coming weeks. A smaller than forecasted rise, or better yet a decline
would be considered good news for the bond market and mortgage rates.
Overall, I am considering Wednesday as the key day of the week with the Fed
events scheduled, but tomorrow could be interesting if the Cyprus news does
cause stock selling when our markets open in the morning. The least
important day will probably be Friday, however, we could see movement in
rates any day. It appears that the recent stock rally could be losing steam
and if that is true we may see funds shift back into bonds in the near
future. Accordingly, I am shifting to a more optimistic stance on rates- at
least for the time being.
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...
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