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This week has five economic reports scheduled for release that are relevant
to mortgage rates in addition to the minutes from last month’s FOMC
meeting. A couple of the reports are considered highly important to the
markets, meaning we could see noticeable movement in rates more than one
day. There is nothing scheduled to be posted tomorrow or Friday, so the
middle part of the week will likely be the most active.
The 3rd Quarter Employment Cost Index (ECI) will be released at 8:30 AM ET
Tuesday. This data tracks employer costs for salaries and benefits, giving
us an indication of wage inflation pressures. Rapidly rising costs raises
wage inflation concerns and may hurt bond prices. It is expected to show an
increase in costs of 0.5%. A smaller than expected increase would be good
news for mortgage rates, but this is not one of the more important reports
of the week. Therefore, it will likely take a large variance from forecasts
for this report of have a noticeable influence on mortgage pricing.
Wednesday has four events scheduled that we need to watch, including two of
the week's more important economic reports. The Commerce Department will
give us October's Retail Sales figures early Wednesday morning. This data
measures consumer level or retail spending. It is considered extremely
important to the markets because it makes up over two-thirds of the U.S.
economy. It is expected to show a 0.1% increase in retail-level spending,
meaning consumers spent just a bit more last month than they did in
September. A larger increase in spending would be considered negative news
for bonds because rising spending fuels economic growth and raises
inflation concerns in the bond market. If Wednesday's report reveals a
decline in spending that indicates consumers spent less than thought, bonds
should react favorably, pushing mortgage rates lower. If it shows an
unexpected increase, mortgage rates will likely move higher.
The second report of the morning will be the release of October's Consumer
Price Index (CPI) from the Labor Department, which is one of the two key
inflation readings on tap this week. The CPI measures inflationary
pressures at the consumer level of the economy and is one of the most
important reports the bond market sees each month. There are two portions
of the index that are used- the overall reading and the core data reading.
The core data is the more important of the two because it excludes more
volatile food and energy prices. If it reveals stronger than expected
readings, indicating that inflationary pressures are rising at the consumer
level, the bond market will probably react negatively and cause mortgage
rates to move higher. Analysts are expecting to see no change in the
overall reading and a 0.2% increase in the core data.
October's Existing Home Sales data will be posted by the National
Association of Realtors late Wednesday morning. It gives us a measurement
of housing sector strength and mortgage credit demand by tracking home
resales in the U.S. This report is expected to show a small decline in
sales, meaning the housing sector weakened slightly last month. That would
be good news for the bond market and mortgage pricing, but unless it shows
a significant surprise, it will likely not have a major impact on mortgage
rates.
Also worth noting is the release of the minutes from the last FOMC meeting
Wednesday afternoon. Traders will be looking for any indication of the
Fed's next move regarding monetary policy or potential tapering of their
current bond purchases. They will be released at 2:00 PM ET, so any
reaction will come during afternoon trading. This release is one of those that
may cause some volatility in the markets after they are posted, or could be
a non-factor. If they show anything surprising, we may see some movement in
rates Wednesday afternoon, but it is more likely there will be little
reaction.
Thursday's only monthly report is October's Producer Price Index (PPI) at
8:30 AM ET. This index is similar to Wednesday's CPI, except it measures
inflationary pressures at the manufacturing level of the economy. The
overall reading is expected to show a 0.2% decline from September's level
while the core data is expected to rise 0.1%. Weaker than expected readings
would be good news for bonds and mortgage rates, while larger than
forecasted increases could lead to higher mortgage rates Thursday morning.
Overall, I am expecting Wednesday to be the most active day for mortgage
rates with three economic reports and the FOMC minutes set for release, but
Thursday could be a little volatile also. The calmest day will probably be
tomorrow while Friday should be a close second unless something unexpected
transpires. The yield on the benchmark 10-year Treasury note closed last
week just above 2.70%, which appears to be somewhat of a support level for
the market. That means there is more of a possibility of it moving higher
than breaking below and since mortgage rates tend to follow bond yields we
could see higher mortgage rates before getting much of an improvement.
Therefore, I strongly recommend proceeding 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... Lock if my closing was taking place over 60 days from
now...
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