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Lock Advice for 10/12/2010

This week brings us the release of five economic reports that are of interest to the mortgage market along with the minutes from the last FOMC meeting and two important Treasury auctions. The week also gets heavy in quarterly earnings releases for companies, which could cause significant movement in the stock markets. The earnings results could affect bond trading as investors move funds into stocks if the reports are good. The other possibility is that the earnings reports would generally disappoint, meaning investors may move funds out of stocks and into bonds as a safe-haven. The latter would be good news for the bond market and mortgage rates.

The bond market is closed tomorrow in observance of the Columbus Day holiday and will reopen Tuesday morning. The stock markets are open for trading tomorrow, so their movement is worth watching as a sizable move up or down in the major indexes may influence bond trading and mortgage pricing early Tuesday morning. I suspect many mortgage lenders will be closed tomorrow, as will U.S. banks. If anyone is open for business and does post rates tomorrow, you can expect to see an increase of approximately .125 – .250 of a discount point from Friday’s morning pricing due to weakness in bonds late Friday afternoon.

The first piece of data comes at 2:00 PM ET Tuesday afternoon when the Fed releases the minutes from their last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over inflation and the Fed’s next move. If Fed members were concerned about inflationary pressures, we may see the bond market move lower and mortgage rates higher Tuesday afternoon. However, if they repeat recent comments and statements that inflation is not of much concern and that there is still considerable concern about the economy, we should see little reaction in mortgage rates or a small improvement. Also worth watching is any discussion about the Fed getting more involved with purchasing government or mortgage debt. Any indication of them making more purchases should be taken as very good news for mortgage rates and will likely lead to lower rates Tuesday afternoon.

Wednesday’s only event is the first of two important Treasury auctions this week. The sale of 10-year Notes will be held Wednesday while 30-year Bonds will be sold Thursday. We often see some weakness in bonds ahead of the sales as the firms participating prepare for them. However, as long as the auctions are met with decent demand from investors, the firms usually buy them back. This tends to help recover any presale losses. But, if the sales are met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM each sale day.

September’s Producer Price Index (PPI) will be release early Thursday morning. This is one of the two very important inflation readings we get each month. This index measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.2% increase in the overall index and a 0.1% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. A larger than expected increase could fuel inflation concerns in the bond market and push mortgage rates higher. However, weaker than expected readings should lead to lower rates Thursday.

August’s Trade Balance report will also be released early Thursday morning. It gives us the size of the U.S. trade deficit but is the week’s least important report and likely will have little impact on the bond market and mortgage rates. Analysts are expecting to see a $44.5 billion deficit, but it will take a wide variance to directly influence mortgage pricing, especially since an important inflation report is also being posted at the same time.

The week closes with three reports being posted Friday morning, two of which are extremely important to the markets and mortgage rates. The first is September’s Retail Sales report that measures consumer spending. This data is very important to the markets because consumer spending makes up two-thirds of the U.S. economy. Therefore, any related data is considered to be highly important. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates should drop. However, stronger than expected sales would fuel optimism about the economy and would likely lead to a stock rally that hurts bonds prices and pushes mortgage rates higher. Current forecasts are calling for a 0.4% increase in sales. Good news for the bond market and mortgage pricing would be a smaller increase.

Friday’s second major economic release is September’s Consumer Price Index (CPI). It measures inflationary pressures at the consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see a rise of 0.2% in the overall index and an increase of 0.1% in the core data reading. A larger than expected increase in the core reading could raise inflation concerns in the bond market and push mortgage rates higher. Inflation is the number one nemesis of the bond market because it erodes the value of a bond’s future fixed interest payments. When inflation is a threat, bonds sell for discounted prices that push their yields higher. And since mortgage rates tend to follow bond yields, this leads to higher rates for mortgage borrowers. This is one of the most important reports we see each month, so its impact on mortgage rates could be significant.

The last report of the week is October’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. Good news for the bond market would be a sizable decline in consumer confidence, but due to the importance of the day’s other two reports, I suspect this data will have little impact on mortgage rates. It is expected to show a reading of 68.6, up slightly from September’s final of 68.2.

Overall, I am expecting to see a fair amount of movement in mortgage rates this week, especially the latter part of the week. The key reports come Friday, so we can label it the most important day of the week. But the active week for corporate earnings can also heavily influence trading and mortgage rates any day of the week. Accordingly, please proceed cautiously and maintain contact with your mortgage professional if you have not locked an interest rates yet.

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…

Demographics

Demographics  Here is the article

Market Commentary for Tuesday, September 28, 2010

Tuesday’s bond market has opened in positive territory following early stock losses and weaker than expected economic news. The stock markets are showing moderate losses with the Dow down 52 points and the Nasdaq down 24 points. The bond market is currently up 12/32, which should improve this morning’s mortgage rates by approximately .250 of a discount point.

 
 

The Conference Board gave us today’s only economic data during late morning trading. They announced that their Consumer Confidence Index (CCI) for September fell to a 7 month low of 48.5. This was well below forecasts and good news for the bond market because waning confidence mean consumers are less apt to make large purchases in the near future. This limits the likelihood of economic growth, making long-term investments such as mortgage-related bonds more attractive to investors.

 
 

Also today is the first of two Treasury auctions that may influence mortgage rates. 5-year Notes will be sold today with results being posted at 1:00 PM ET. These securities are not directly tied to mortgage rates, but the sale will give us an indication of investor appetite for U.S. debt. If the sale was met with a strong demand from investors, the broader bond market should react positively this afternoon, possibly leading to a downward revision to mortgage rates later today.

 
 

There is no relevant economic data scheduled to be posted tomorrow, but we do have the 7-year Note sale to digest. This sale is closer to mortgage debt than today’s sale is, so we can expect a more direct impact on mortgage pricing than today’s results. We can also expect the stock markets to play a major role in which direction bonds and mortgage rates move tomorrow.

 
 

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…

Market Commentary for September 21, 2010

Tuesday’s bond market has opened in positive territory after stocks failed to extend yesterday’s gains during early morning trading. The stock markets are showing small losses with the Dow down 18 points and the Nasdaq down 5 points. The bond market is currently up 9/32, which should improve this morning’s mortgage rates by approximately .250 of a discount point.

This morning’s only factual economic data was August’s Housing Starts that showed surprising strength in new home building. Analysts were expecting to see a minor increase in starts but the 10.5% jump that today’s report revealed was well above forecasts. This can be considered a sign of housing strength, but since this data is not looked at as a major release, its impact on this morning’s trading and mortgage pricing has been minimal.

Fed Chairman Bernanke and friends are currently in their Federal Open Market Committee (FOMC) meeting to discuss monetary policy and key short-term interest rates. They will adjourn at 2:15 PM ET with a statement of their actions. There is little possibility of seeing a change to key short-term interest rates. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find when the Fed’s next move may come. What we particularly are looking for is further comments about the Fed buying more government or mortgage debt. If there is a clear indication that they will buy more in the immediate future, the bond market should react positively this afternoon, possibly pushing mortgage rates lower.

There is no relevant economic data scheduled for release tomorrow, so we can expect to see the stock markets influence bond trading and mortgage rates. If today’s FOMC results lead to a sizable move in the markets, there is a decent possibility of that reaction carrying into tomorrow’s morning trading also. Look for an update to this report today shortly after the financial and mortgage markets have an opportunity to react to the FOMC statement.

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… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now…

First Time Home Buyer Home Affordability Calculators (Now vs. Later)

This is a really cool affordability tool, and there are a couple of other links on this page which will send you to appreciation and affordability data per Metropolitan Statistical Area.  (look for Portland!)

http://fatcopdx.com/FATCO%20TOuyNow.vs.Later/BuyNow.vs.Later.htm

Thursday, August 12, 2010

Thursday’s bond market has opened flat following weaker than expected results from today’s minor economic news. The stock markets are extending yesterday’s sell-off after tech-giant Cisco Systems reported disappointing earning results. The Dow is currently down 58 points while the Nasdaq has lost 18 points. The bond market is currently up 2/32, which will likely keep this morning’s mortgage rates at yesterday’s levels.

The Labor Department gave us today’s only semi-relevant economic data with the release of last week’s unemployment numbers. They said early this morning that 484,000 new claims for unemployment benefits were filed last week. That was a slight increase from the previous week’s revised total and a much larger number than what analysts were expecting this morning. Therefore, this data can be considered favorable for the bond market and mortgage rates.

Yesterday’s 10-year Treasury Note sale went fairly well. The readings used to measure its success were a little mixed, but overall it is being considered positive for the broader bond market. If today’s 30-year Bond sale goes equally well, we may see further improvements to bonds later today. However, I am not expecting a reaction that is strong enough to improve mortgage rates this afternoon. Results of the sale will be posted at 1:00 PM ET.

Tomorrow brings us the release of three reports, two of which are highly important to the markets and mortgage rates. The first is July’s Consumer Price Index (CPI) at 8:30 AM. The CPI is one of the most important reports we see each month. It measures inflation at the consumer level of the economy. There are two readings in the report- the overall index and the core data reading. The more important of the two is the core data because it excludes more volatile food and energy prices. Current forecasts call for a 0.2% increase in the overall index and a 0.1% increase in the core data reading. Declines in the readings, especially in the core data, should lead to a bond rally and lower mortgage rates. However, if we see stronger than expected readings tomorrow, mortgage pricing may jump higher.

July’s Retail Sales data is the second report of the day and is nearly important as the CPI. This data is very important to the financial markets and mortgage rates because it helps us measure consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any data related to it can cause a fair amount of movement in the markets. A smaller than expected increase would indicate that consumers are spending less than previously thought, potentially slowing the economic recovery. This is good news for the bond market and mortgage rates as it eases inflation concerns and makes long-term securities such as mortgage-related bonds more attractive to investors. Current forecasts are calling for an increase of 0.5%.

The last report of the day will come from the University of Michigan, who will release their Index of Consumer Sentiment for August at 9:45 AM. This index gives us a measurement of consumer willingness to spend. If confidence is rising, then consumers are more apt to make large purchases. This helps fuel consumer spending and economic growth. By theory, a drop in confidence should boost bond prices, but this is the least important of the day’s three reports and will probably have little impact on rates.

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… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now…

TUESDAY AFTERNOON UPDATE:

 
 

 
 

 
 

TUESDAY AFTERNOON UPDATE:

Today’s FOMC meeting has adjourned with no change to key short-term interest rates. However, the post-meeting statement did give us a bit of a surprise that was quite favorable to the bond market and mortgage rates. In the statement the Fed indicated that they expect the economy to grow at a slower pace than estimated at the last FOMC meeting in late June. They renewed their “subdued” outlook for inflation, which is the key point for the bond market and the indication that they expect to keep key interest rates at their current level for an “extended period.” That leads market participants to believe that the Fed is still concerned about the economy’s ability to expand and maintain momentum.

 
 

The surprise came from an announcement that the Fed will use funds from its holdings in mortgage bonds to buy more government debt. What this means is that the Fed is taking its interest payments and reinvesting them into the economic recovery. This will be a much smaller campaign than we saw from them last year and early this year, but it is still considered good news. The goal is to help keep long-term interest rates low, such as home mortgage rates and corporate bond rates, in an effort to spur more spending and economic activity. The general consensus is that the impact this will have on the economy is minimal, but it does show that the Fed is attentive to current conditions and is ready to take more measures if needed.

 
 

The financial markets have rallied after the announcement was made, particularly bonds. The stock markets erased a good part of their earlier losses, while the bond market extended its morning gains. The Dow is currently down 38 points and the Nasdaq is down 22 points. The bond market is currently up 20/32, which should improve mortgage rates by approximately .125 – .250 of a discount point from this morning’s rates.

 
 

Second quarter Employee Productivity and Costs data was released early this morning. It revealed a surprising 0.9% decline in worker productivity. This means that employees were less productive during the quarter than many had thought. That can be considered bad news for bonds, but offsetting that surprise was a much smaller than expected increase in labor costs. They rose 0.2% compared to the 1.4% rise that was forecasted, which means that employer costs for wages rose at a slower pace than expected. That can be considered good news for the bond market and mortgage rates because rising costs translates into higher prices for products at the consumer level and gives workers more money to spend, fueling economic activity.

 
 

Tomorrow’s only data will be June’s Trade Balance report at 8:30 AM ET. It gives us the size of the U.S. trade deficit but is the week’s least important report and likely will have little impact on the bond market and mortgage rates. Analysts are expecting to see a $42.5 billion deficit, but it will take a wide variance to directly influence mortgage pricing.

 
 

If I were considering financing/refinancing a home, I would…. Float 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…

Tuesday, August 10, 2010

 
 

 
 

Tuesday’s bond market has opened up slightly after this morning’s economic news gave us mixed results. The stock markets are showing losses with the Dow down 84 points and the Nasdaq down 21 points. The bond market is currently up 2/32, which may improve this morning’s mortgage rates by approximately .125 of a discount point.

 
 

Second quarter Employee Productivity and Costs data was released early this morning. It revealed a surprising 0.9% decline in worker productivity. This means that employees were less productive during the quarter than many had thought. That can be considered bad news for bonds, but offsetting that surprise was a much smaller than expected increase in labor costs. They rose 0.2% compared to the 1.4% rise that was forecasted, which means that employer costs for wages rose at a slower pace than expected. That can be considered good news for the bond market and mortgage rates because rising costs translates into higher prices for products at the consumer level and gives workers more money to spend, fueling economic activity.

 
 

Today also brings us another FOMC meeting. It is a single day meeting that will adjourn at 2:15 PM ET. There is practically no possibility of the Fed changing key short-term interest rates, but the markets will be watching the post-meeting statement very closely. Mr. Bernanke and some of his colleagues have indicated recently that the economy is not growing as quickly as previously thought and have renewed concerns about certain hurdles such as housing and unemployment. So, it would not be a surprise to see some minor adjustment to the statement that would hint a more cautious tone than previous statements. If this is the case, we may see bond prices rise and mortgage rates move lower during afternoon trading today.

 
 

Tomorrow’s only data will be June’s Trade Balance report at 8:30 AM ET. It gives us the size of the U.S. trade deficit but is the week’s least important report and likely will have little impact on the bond market and mortgage rates. Analysts are expecting to see a $42.5 billion deficit, but it will take a wide variance to directly influence mortgage pricing.

 
 

Look for an update to this report shortly after the markets have an opportunity to react to this afternoon’s event.

 
 

If I were considering financing/refinancing a home, I would…. Float 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…

Monday, August 09, 2010

Monday’s bond market has opened flat despite modest stock gains. The stock markets are starting the week in positive territory with the Dow up 25 points and the Nasdaq up 8 points. The bond market is nearly unchanged from Friday’s close, which should keep this morning’s mortgage rates close to Friday’s levels.

There is no relevant economic data scheduled for release today, so look for the stock markets to be the cause of any afternoon revision to mortgage rates. If the major stock indexes move upward from current levels, we could see bonds weaken and mortgage rates increase later today. But if stocks move lower by a good margin, we should see mortgage pricing improve this afternoon.

The rest of the week brings us the release of five economic reports for the bond market to digest in addition to another FOMC meeting and two relevant Treasury auctions. It starts tomorrow morning when Employee Productivity and Costs data for the second quarter will be posted. It will give us an indication of employee output. High levels of productivity are believed to allow the economy to grow without fears of inflation. I don’t see this being a big mover of mortgage pricing, but since it is the only data of the day it may influence rates slightly during morning trading. Analysts are currently expecting to see an increase in productivity of only 0.1%. A higher than expected reading could help improve bonds, leading to lower mortgage rates tomorrow.

The next FOMC meeting, which is a single day meeting, is tomorrow and will adjourn at 2:15 PM ET. It is expected to yield no change to key interest rates. Usually, the post-meeting comments seem to have more of an influence on the markets than the rate adjustments themselves, or a lack of one in many cases. Look for the statement to lead to volatility during afternoon trading if it hints at what the Fed’s next move may be and when it will come. If the statement does not give us new information, mortgage rates will probably move little after its release.

The most important data of the week comes Friday when we will get three reports, two of which are highly important to the markets and mortgage rates. Those two reports, July’s Retail Sales and Consumer Price Index, can lead to sizable movement in the markets and mortgage pricing.

Overall, look for the most movement in bond prices and mortgage rates late in the week. Friday will likely turn out to be the most important day with two of the week’s most important releases and three reports scheduled altogether. If we get stronger than expected results in the Retail Sales and CPI releases, we may see mortgage rates spike higher fairly quickly. I suspect the FOMC meeting will not have as much of an influence on mortgage rates as recent meetings have, but the markets can react wildly to a single word or omission of a word in the statement, so we need to be cautious. This is certainly another week that continuous contact with your mortgage professional is highly recommended if you are still floating an interest rate.

If I were considering financing/refinancing a home, I would…. Float 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…