This week brings us the release of only three pieces of monthly economic
data, none of which is considered to be highly important. In addition to
the economic data, the minutes from the last FOMC meeting will also be
posted. There is nothing of relevance to mortgage rates scheduled for
release tomorrow or Tuesday, so look for the stock markets to drive bond
trading and mortgage rates until we get to mid-week.
The first piece of data will be July's Existing Home Sales report late
Wednesday morning. The National Association of Realtors will release this
report, giving us a measurement of housing sector strength and mortgage
credit demand. It covers a very high percentage of all home sales in the
U.S., but usually does not have a major influence on bond trading and
mortgage rates unless it varies greatly from analysts' forecasts. It is
expected to show an increase from June's sales, meaning the housing
sector strengthened last month. This would generally be bad news for the
bond market and mortgage rates because a strengthening housing sector
makes broader economic growth more likely. But unless the increase is
much larger than current forecasts, the report will likely have a minimal
impact on Wednesday's mortgage pricing.
Also Wednesday, we will get the minutes from the last FOMC meeting. There
is a pretty good possibility of the markets reacting to them following
their release. Market participants will be looking for how Fed members
voted during the last meeting and any comments about inflation concerns
in the economy, economic growth and the Fed’s plans for their current
bond buying program (QE3). The goal is to form opinions about when
Chairman Bernanke and friends are likely to start tapering their current
$85 billion monthly bond purchases. Since the minutes will be released at
2:00 PM ET, if there is a market reaction to them it will be evident
during afternoon trading. This is one of those events that can cause
significant movement in rates after its release or be a non-factor, so be
prepared for a move, but not surprised if the impact on rates is minimal.
The Conference Board is a New York-based business research group that
will post its Leading Economic Indicators (LEI) for July late Thursday
morning. This index attempts to measure economic activity over the next
three to six months and is considered to be moderately important. A
higher than expected reading is bad news for the bond market because it
indicates that the economy may be strengthening more than thought.
However, a weaker reading means that the economy may not grow as much as
predicted, making stocks less appealing to investors. This also eases
inflation concerns in the bond market and could lead to slightly lower
mortgage rates Thursday if the stock markets remain calm. It is expected
to show an increase of 0.5 % in the index, indicating moderate economic
growth over the next couple of months. It will take a sizable difference
between forecasts and its actual reading for this report to noticeably
influence mortgage rates.
July's New Home Sales data is the final report of the week, which will be
released at 10:00 AM ET Friday morning. This report will give us another
indication of housing sector strength and mortgage credit demand, but
only tracks a small portion of all home sales. It usually doesn't have
much of an impact on bond prices or mortgage rates unless it varies
greatly from forecasts. Current forecasts are calling for a minor decline
in sales of newly constructed homes from June to July. An unexpected
increase in sales would hint at sector strength, making the data negative
for mortgage rates.
Overall, Wednesday is likely to be the most active day for mortgage rates
and Tuesday appears to be the best candidate for least important. Stocks
will probably be a contributing factor to bond movement several days with
no key economic data scheduled this week. Afternoon weakness in bonds
Friday pushed the benchmark 10-year Treasury Note yield up to 2.83%
Friday, continuing its upward trend. Unfortunately, I don’t believe we
have a good chance of seeing that reverse until we get closer to 2.95%.
Since mortgage rates tend to follow bond yields this is would be bad news
for mortgage shoppers. Therefore, 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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