This week has five economic reports scheduled for release that are relevant
to mortgage rates in addition to two Treasury auctions that can potentially
affect rates. There is data being posted four of the five days with
Wednesday the only day with nothing scheduled, but none of the reports are
considered to be highly important or key data. Still, most of the week’s
releases carry enough significance to affect mortgage rates if their
results vary from forecasts.
The Commerce Department will post July's Durable Goods Orders early
tomorrow morning, giving us an important measure of manufacturing sector
strength. This report tracks orders at U.S. factories for big-ticket items,
or products that are expected to last three or more years such as
appliances, electronics and airplanes. Analysts are expecting to see a
decline of 4.5% in new orders, indicating manufacturing sector weakness.
This data is known to be quite volatile from month to month, so a decline
of this size doesn’t raise too much concern about the economy. However, a
decent sized decline is good news for the bond market and mortgage rates as
it means manufacturing activity is likely softening. A secondary reading
the excludes more volatile transportation-related orders is expected to
rise 0.5%. The softer the reading, the better the news it is for the bond
and mortgage markets.
Tuesday also has only one report worth watching. The Conference Board will
post their Consumer Confidence Index (CCI) for August at 10:00 AM ET
Tuesday. This index measures consumer sentiment about their personal
financial situations, which helps us measure consumer willingness to spend.
If consumers are feeling more confident in their own finances, they are
more apt to make a large purchase in the near future, fueling economic
growth. A decline in confidence would indicate that surveyed consumers probably
will not be buying something big in the immediate future. That would be a
sign of economic weakness and should drive bond prices higher, leading to
lower mortgage rates Tuesday. It is expected to show a reading of 77.0,
which would be a decline from July's 80.3. The lower the reading, the
better the news for bonds and mortgage rates.
Thursday’s only monthly or quarterly data is the first revision to the 2nd
Quarter Gross Domestic Product (GDP) at 8:30 AM ET. The GDP is the total of
all goods and services produced in the U.S. and is considered to be the
best measurement of economic growth or contraction. This reading is the
second of three that we see each quarter. Last month's preliminary reading
revealed that the economy grew at an annual rate of 1.7%. Thursday's
revision is expected to show that the GDP actually rose 2.1%, meaning the
economy was stronger than thought from April through June. A smaller than
expected reading should help lower mortgage rates, especially if the
inflation portion of the release does not get revised higher. There will be
a final revision issued next month, but it probably will have little impact
on mortgage rates since traders will be more interested in the current
quarter's activity.
Friday is a multi-release day with two pieces of economic data set to be
posted. July's Personal Income and Outlays report is the first at 8:30 AM
ET. This data will give us a measure of consumer ability to spend and
current spending habits. Rising income means consumers have more money to spend.
It is expected to show an increase of 0.1% in income and a 0.3% increase in
spending. Since consumer spending makes up over two-thirds of the U.S.
economy, weaker than expected numbers would be considered good news for the
bond market and mortgage pricing.
The second report of the morning will be the University of Michigan's
revised Index of Consumer Sentiment for August. This sentiment index helps
us track consumer willingness to spend similarly to Tuesday's CCI. It is
expected to show no change from August's preliminary reading of 80.0. If it
revises lower, consumers were less confident about their personal financial
situations than previously thought. This would be good news for the bond
market and mortgage rates because waning confidence usually means that
consumers are less likely to make large purchases in the near future. As
with the CCI index, the lower the reading the better the news for mortgage
shoppers.
Also worth mentioning are a couple of Treasury auctions that may affect
bond trading and mortgage rates this week. There auction several days, but
the two relevant ones are Wednesday's 5-year Note and Thursday's 7-year
Note sales. Results of the auctions will be posted at 1:00 PM ET each day.
If investor interest is strong in the auctions, we can expect the broader
bond market to rally and mortgage rates to move lower. However, lackluster
demand could lead to bond selling and higher mortgage rates Wednesday and
Thursday afternoons.
Overall, I am expecting to see the most movement in rates Thursday or
Friday, but tomorrow’s Durable Goods report could be the week’s most
important report if the GDP shows no surprises. Wednesday looks to be the
lightest day with nothing of importance scheduled except the moderately
important Treasury auction. We saw bonds rally Friday after a moderately
important housing report showed much weaker than expected results. If that
momentum can carry into this week’s trading and the data doesn’t show
significantly stronger than forecasted results, we could see rates start a
downward trend. The yield on the benchmark 10-year Treasury Note fell to
2.82% Friday from 2.90% at Thursday’s close. Look for tomorrow’s trading to
help determine if Friday’s rally was a knee-jerk reaction that cannot be
sustained or if the overall tone in the bond market has changed and rates
will continue to move lower. Even though none of this week’s economic data
is considered to be a market mover, we still should see plenty of activity
and movement in rates. Therefore, please proceed cautiously if still
floating an interest rate and closing in the near future.
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... Lock 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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