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There are six economic reports scheduled for release this week that have
the potential to affect mortgage rates. We have monthly reports set for
every day except Thursday with a couple of those reports considered to be
highly important. Therefore, I believe it will be another active week for
mortgage rates.
The Institute for Supply Management's (ISM) manufacturing index will be
posted late tomorrow morning. This highly important index measures
manufacturer sentiment. One reason why it is considered so important is the
fact that it is the first piece of economic data posted every month that
covers the preceding month. In other words, it is the first look into the
previous month’s economic conditions. That differs from many reports that
aren’t released until mid or late month. A reading above 50 means that more
surveyed manufacturing executives felt that business improved during the
month than those who felt it had worsened. Analysts are expecting to see a
50.9 reading in this month's release, meaning that sentiment rose slightly
during May. A smaller reading will be good news for the bond market and
mortgage shoppers while an unexpected increase could contribute to higher
mortgage rates tomorrow.
Tuesday’s only data is April's Goods and Services Trade Balance report. It
gives us the size of the U.S. trade deficit and will be released at 8:30 AM
ET. It isn't likely to cause much movement in the markets or mortgage
rates, but nevertheless forecasters are expecting to see a $41.1 billion
trade deficit. It will take a wide variance from this projection for the
data to influence mortgage rates.
The revised 1st Quarter Productivity and Costs data is the first of three
reports that will be released Wednesday. This data measures employee output
and employer costs for wages and benefits. It is considered to be a
measurement of wage inflation. It is believed that the economy can grow
with low inflationary pressures when productivity is high. Last month's
preliminary reading revealed a 0.7% increase in productivity and a 0.5%
increase in labor costs. Wednesday’s update is predicted to show 0.6%
increases in both readings. I don't think this piece of data will have much
of an impact on the bond market or mortgage pricing either unless it varies
greatly from expectations.
The second release of the day will come from the Commerce Department, who
will post April's Factory Orders data during late morning trading. This
manufacturing sector report is similar to last week's Durable Goods Orders
release, but also includes orders for non-durable goods. It can cause some
movement in the financial markets if it varies from forecasts by a wide
margin, but it isn't expected to cause much of a change in rates this
month. Current forecasts are calling for an increase in orders of 1.5%.
Wednesday’s final relevant report is the Federal Reserve's Beige Book,
which is named simply after the color of its cover. This report details
economic conditions throughout the U.S. by Federal Reserve region. It is
relied upon heavily by the Fed to determine monetary policy during their
FOMC meetings. If it shows surprisingly softer economic activity since the
last report, the bond market may thrive and mortgage rates could drop
shortly after the 2:00 PM ET release. If it reveals signs of inflation
growing or rapidly expanding economic activity in many regions, we could
see mortgage rates revise higher Wednesday afternoon.
Thursday doesn’t have any monthly or quarterly economic data for us to be
concerned with, but there are a couple of foreign central bank
announcements that are similar to our FOMC meetings. The Bank of England
(BOE) and the European Central Bank (ECB) will both make monetary policy
announcements before our markets open Thursday morning. The world markets,
including ours, will be watching for any changes or updates about economic
and financial conditions in their respective regions. Of particular
interest will be the ECB announcement that is more likely to disrupt the
global markets. It is difficult to predict not only what will be said but
also what kind of reaction we can expect. We simply will have to wait and
see what happens. They could be a non-factor or cause global volatility, so
they are on my calendar.
Friday's sole report is arguably the single most important report that we
see each month. The Labor Department will post May's Employment data early
Friday morning. This report gives us key employment readings such as the
U.S. unemployment rate and the number of jobs added or lost during the
month. Analysts are expecting to see the unemployment rate remain unchanged
at 7.5% with approximately 164,000 jobs added to the economy during the
month. A higher than expected unemployment rate and a much smaller number
than the 164,000 new payrolls would be great news for the bond market. It
would probably create a sizable rally in bonds, leading to lower mortgage
rates Friday. However, stronger than expected numbers may lead to another
spike in mortgage rates.
Overall, it appears that Friday is the key day of the week with regards to
mortgage rate movement. However, tomorrow or Wednesday could also be active
days for mortgage pricing. Tuesday will probably be the lightest day unless
something totally unexpected happens with stocks. Although, as we have seen
many times over the past couple weeks, we don’t have to have an event or
economic report released for the bond market and mortgage rates to become
volatile. Therefore, it would be prudent to continue to maintain contact
with your mortgage professional 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... Float if my closing was taking
place between 8 and 20 days... Float 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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