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This week brings us the release of only four pieces of relevant economic
data that may influence mortgage rates, but two of them are considered to
be highly important. In addition, the Independence Day holiday falls in
the middle of the week again this year, so we also have an early and
full-day closure to work around.
Unlike many Mondays, tomorrow does bring us some very important economic
data. The Institute of Supply Management (ISM) will post their
manufacturing index for June late tomorrow morning. This index measures
manufacturer sentiment by surveying trade executives on current business
conditions. May’s reading that was posted last month surprised many when
it came in at 49.0. A reading below 50 means that more surveyed
executives felt business worsened during the month than those who felt it
had improved. Analysts are expecting a reading of 50.5, indicating slight
improvement in manufacturer sentiment. Good news for the bond market and
mortgage rates would be another decline in the index, signaling worsening
conditions in the manufacturing sector.
The Commerce Department will post May's Factory Orders data late Tuesday
morning, which is similar to the Durable Goods Orders report that was
released last week. The biggest difference is that this week's report
covers both durable and non-durable goods. It usually doesn't have as
much of an impact on the bond market as the durable goods data does, but
can lead to changes in mortgage pricing if it varies greatly from
forecasts. Current expectations are showing a 2.0% increase in new orders
from April's levels, pointing towards sector strength. A decline in
orders would be considered good news for the bond market and could help
lower mortgage rates slightly Tuesday.
May’s Goods and Services Trade Balance will be released at 8:30 AM ET
Wednesday. It is the week's least important data and probably will not
influence mortgage rates. It measures the size of the U.S. trade deficit
and is expected to show a $40.8 billion deficit. This data usually does
not directly affect mortgage rates, but it does influence the value of
the U.S. dollar versus other currencies. A stronger dollar makes U.S.
securities more attractive to international investors because they are
worth more when sold and converted to the investor's domestic currency.
But unless we see a significant variance from forecasts, I don't believe
this data will lead to a change in mortgage rates Wednesday.
The U.S. financial and mortgage markets will be closed Thursday in
observance of the Independence Day holiday. They will also close early
Wednesday afternoon ahead of the holiday and will reopen Friday morning
for regular trading hours. We could see bond traders sell some holdings
before the 2:00 PM ET close to protect themselves over the holiday, which
raises the possibility of seeing an upward revision to mortgage rates
Wednesday afternoon.
The last data of the week is arguably the single most important report we
see each month. The Labor Department will post June's unemployment rate,
number of new payrolls added or lost and average hourly earnings early
Friday morning. These are considered to be very important readings of the
employment sector and can have a huge impact on the financial markets.
The ideal scenario for the bond market is rising unemployment, a large
decline in payrolls and no change in earnings. Weaker than expected
readings would raise concerns about economic growth and likely help boost
bond prices and lower mortgage rates Friday. However, stronger than
expected readings could be extremely detrimental to mortgage pricing as
it would help support the theory that we will see good economic growth
later this year. Analysts are expecting to see the unemployment rate
remain at 7.6%, with 165,000 jobs added and a 0.2% rise in earnings.
Overall, I am expecting to see another fairly active week for the
financial markets and mortgage rates. We have a small improvement in rates
waiting for us tomorrow morning due to strength in bonds late Friday. The
most important day of the week is Friday, but tomorrow could also be a
key day in determining whether rates move higher or lower on the week.
With two of the week’s three full-length trading days having key economic
data scheduled for release, I strongly recommend maintaining contact with
your mortgage professional if still floating an interest rate.
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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