This holiday-shortened week brings us the release of four
relevant economic reports for the markets to digest in addition to Treasury
auctions that have the potential to influence bond trading and mortgage rates.
None of the reports are considered to be key data, but all of them do carry
enough significance to affect mortgage rates if their results show any
surprises. The financial and mortgage markets will be closed Monday in
observance of the Memorial Day holiday and will reopen for regular trading
Tuesday morning.The Conference Board will start the week’s events by posting their Consumer Confidence Index (CCI) at 10:00 AM Tuesday. This data measures consumer willingness to spend. If the index rises, it indicates that consumers felt better about their personal financial situations and therefore are more apt to make large purchases in the near future. If confidence is sliding, analysts think consumer spending may slow in the near future. The latter is good news for the bond market because consumer spending makes up over two-thirds of the U.S. economy. A decline in the index should boost bond prices and push mortgage rates lower Tuesday morning while a larger than expected increase would likely cause rates to move higher. It is expected to show a reading of 72.5, up from April’s 68.1 reading.
Wednesday has nothing scheduled that is expected to affect mortgage rates except the first of this week’s two Treasury auctions that are worth watching. The Fed will auction 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors that brings more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours Wednesday and Thursday.
The next report will be Thursday’s release of the first of two revisions to the 1st quarter Gross Domestic Product (GDP) at 8:30 AM ET. The second revision to this index comes next month but isn’t expected to carry much importance. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best measurement of economic growth. Last month’s preliminary reading revealed a 2.5% increase in the annual rate of growth. Analysts expect no change in this update. If the revision comes in much stronger than expected, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was stronger than thought last quarter. On the other hand, a much weaker reading could lead to stock selling, a bond rally and lower mortgage rates.
Friday has the remaining two pieces of data. April’s Personal Income and Outlays data is the first at 8:30 AM ET. It gives us an indication of consumer ability to spend and current spending habits. An increase in income means that consumers have more money available to spend. As we pointed out above, since consumer spending makes up over two-thirds of our economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.1% increase in income and a 0.1% rise in spending. Weaker readings would be considered good news for bonds and mortgage rates.
The last relevant data of the week will come from the University of Michigan, who will update their Index of Consumer Sentiment for May late Friday morning. This type of data is watched closely because when consumers are feeling more confident about their own financial situations, they are more likely to make a large purchase in the near future. Rising confidence and the higher levels of spending that usually follow are considered negative news for bonds and mortgage rates. Friday’s report is expected to show no change from this month’s preliminary reading of 83.7. A higher reading would be considered negative for bonds and mortgage pricing.
Overall, it is difficult to label any particular day as the week’s most important. The most important data is Tuesday’s or Friday’s releases, assuming that Thursday’s GDP reading does not show a sizable revision. With two relatively important reports scheduled for Friday, I am leaning towards it as likely to be the most active, but Tuesday could also bring noticeable changes to rates after the long holiday. The least active day will probably be Wednesday unless the stock markets rally or show sizable losses. Please keep in mind though, as we saw several days the past couple weeks, we don’t have to have important data for the markets and mortgage pricing to move considerably. Therefore, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.
Happy Memorial Day
Memorial Day is almost like the starting flag for barbecues and picnics. But
there is the serious side of the holiday where we honor those who have died in
the line of service to their country.
Memorial Day was originally named Decoration Day and was started after the American Civil War to commemorate the Union and Confederate soldiers who died during the Civil War.
Many volunteers visit cemeteries and place American flags on the graves of those who died during military service.
From Wikipedia:
Annual Decoration Days for particular cemeteries are held on a Sunday in late spring or early summer in some rural areas of the American South, notably in the mountains. In cases involving a family graveyard where remote ancestors as well as those who were deceased more recently are buried, this may take on the character of an extended family reunion to which some people travel hundreds of miles. People gather on the designated day and put flowers on graves and renew contacts with kinfolk and others. There often is a religious service and a “dinner on the ground,” the traditional term for a potluck meal in which people used to spread the dishes out on sheets or tablecloths on the grass. It is believed that this practice began before the American Civil War and thus may reflect the real origin of the “memorial day” idea.The first Memorial Day started in Charleston by freed slaves to honor prisoners of war who had died (also from Wikipedia):
During the war, Union soldiers who were prisoners of war had been held at the Charleston Race Course; at least 257 Union prisoners died there and were hastily buried in unmarked graves. Together with teachers and missionaries, blacks in Charleston organized a May Day ceremony in 1865, which was covered by the New York Tribune and other national papers. The freedmen had cleaned up and landscaped the burial ground, building an enclosure and an arch labeled, “Martyrs of the Race Course.” Nearly ten thousand people, mostly freedmen, gathered on May 1 to commemorate the dead.It’s unknown if this was the true starting point for creating a nationwide Memorial Day. The Northerner’s credit Waterloo, New York with having the first Memorial Day on May 5, 1866.
Most ceremonies begin with the American flag being raised to the top of the flagpole, and then lowered to halfmast until noon, and then raised again to the top for the remainder of the day.
The ceremonies also include speeches, usually from community leaders and veterans. And many communities will have parades.
There is a custom of wearing red poppies to honor the fallen.
There actually is a National Memorial Day concert. It is held on the West Lawn of the United States Capitol building. The official time for Memorial Day is 3pm Eastern Standard Time, which seems odd since we’re now on Daylight Savings Time.
The Veterans of Foreign Wars is trying to get the holiday changed back to a fixed date. In 2002, the VFW issued this statement: “Changing the date merely to create a three-day weekend has undermined the very meaning of the day. No doubt, this has contributed a lot to the general public’s nonchalant observance of Memorial Day.”
Do you think that’s a good idea? Or is it better to have the long weekend to make it easier for the cemeteries?
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