There are six pieces of economic news that may affect mortgage rates this week.
Some of the data is considered highly important to the financial and mortgage markets, so it will likely be an active week for mortgage rates. As the week progresses, the data gets more important.
Unlike most Mondays, there is data being posted this morning with the release of October’s New Home Sales report. It will give us an indication of housing sector strength, but is the week’s least important release. Analysts are expecting to see little change between September’s and October’s sales of newly constructed homes. It will take a large change in sales for this data to influence mortgage rates.
November’s Consumer Confidence Index (CCI) will be released late Tuesday morning by the Conference Board. It gives us a measurement of consumer willingness to spend. If consumer confidence is rising, analysts believe that consumers are more apt to make larger purchases, essentially fueling economic growth. This makes long-term securities such as mortgage-related bonds less attractive to investors and usually leads to higher mortgage rates. Analysts are expecting to see a sizable increase in confidence from last month’s level, meaning consumers were more optimistic about their own financial situations this month than they were last month. A weaker reading than the 44.0 that is expected would be good news for mortgage rates, while a stronger reading could push mortgage rates higher Tuesday.
The next piece of data that we need to be concerned with comes early Wednesday morning when revised 3rd Quarter Productivity numbers are posted. This index is expected to show an upward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn’t necessarily bad for the bond market. It’s the conditions around an expanding economy, such as inflation, that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 2.6%, down from the previous estimate of 3.1%.
Also Wednesday, the Federal Reserve will release their Beige Book at 2:00 PM ET. This report, which is named simply after the color of its cover, details economic conditions by region. That information is relied on heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any significant surprises. More times than not, this report will not influence the markets enough to cause intra-day changes to mortgage rates, but the potential to do so does exist.
November’s manufacturing index from the Institute for Supply Management (ISM) will be posted at 10:00 AM ET Thursday. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for a small decline in sentiment from October to November. October’s reading was previously announced as 50.8. A weaker reading than the expected 51.0 would be good news for the bond market and mortgage rates. A reading above 50 means that more surveyed trade executives felt business improved during the month than those who felt it had worsened. The lower the reading the better the news for bonds because waning sentiment indicates a slowing manufacturing sector and makes a broader economic recovery less likely.
The biggest news of the week comes Friday morning when the Labor Department posts November’s Employment figures. This is arguably the most important monthly report we see. It is comprised of many statistics and readings, but the most watched ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate of 9.0% while 117,000 new jobs were added to the economy. The income reading is forecasted to show an increase of 0.2%. An ideal scenario for mortgage shoppers would be a higher unemployment rate than 9.0%, a smaller increase in payrolls and no change in the earnings reading. If we are fortunate enough to hit the trifecta with all three, we should see the stock markets fall, bond prices rise and mortgage rates move lower Friday. However, stronger than expected readings would likely fuel a stock rally and bond sell-off that would lead to higher mortgage rates.
Overall, the most important day of the week is Friday with the employment figures being released, but we may also see sizable movement in rates Thursday. Friday’s employment data could cause a significant change in rates, but Thursday’s ISM index is also one of the more important reports we see each month. If Friday’s data reveals stronger than expected results we may see rates spike higher after its release, possibly erasing any gains from the week. It will probably be the key to rates moving lower or higher for the week. I suspect it will be a fairly active week for the markets and mortgage pricing, especially the latter part, so it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.
Tuesday, November 29, 2011
Monday, November 28, 2011
Wednesday, November 23, 2011
The Housing Problem - Try Something that had Previously Been Unthinkable
The Housing Problem Isn't Getting Better - Maybe It's Time for Scary Thinking
Click here:
http://www.phhmortgagesolutions.com/files/11-11%20MB_Exec%20Suite-Selitto.pdf
Click here:
http://www.phhmortgagesolutions.com/files/11-11%20MB_Exec%20Suite-Selitto.pdf
Monday, November 21, 2011
This Week's Market Commentary
This holiday-shortened week brings us the release of five relevant economic reports for the markets to digest along with the last FOMC meeting’s minutes and two potentially important Treasury auctions.
All of the week’s data is being posted over three days due to the Thanksgiving holiday, so the first part of the week should be interesting for mortgage shoppers.
October’s Existing Home Sales data will be posted by the National Association of Realtors late Monday morning. It gives us a measurement of housing sector strength and mortgage credit demand by tracking home resales. This report is expected to show a decline in sales, meaning the housing sector weakened 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 tomorrow’s mortgage rates.
Tuesday has the first revision to the 3rd Quarter Gross Domestic Product (GDP). It is expected to show little change from last month’s preliminary reading of a 2.5% annual rate of expansion. The GDP measures the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic activity. Current forecasts call for a reading of approximately 2.4%, meaning that there was slightly less economic growth during the third quarter than previously thought. This would be good news for the bond market and mortgage rates, but it will likely take a larger decline to improve mortgage rates Tuesday morning.
Also worth noting is the release of the minutes from the last FOMC meeting Tuesday afternoon. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, 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 Tuesday afternoon, but it is more likely there will be little reaction since Fed Chairman Bernanke held a press conference following the most recent meeting.
There are three monthly reports scheduled for Wednesday morning. October’s Durable Goods Orders is the first and will be posted at 8:30 AM ET. This data helps us measure manufacturing strength by tracking orders for big-ticket items, but is known to be quite volatile from month-to-month. It is expected to show a 1.0% decline in new orders. A larger than expected drop would be considered good news for the bond market and mortgage rates as it would indicate manufacturing sector weakness.
The second is October’s Personal Income and Outlays data. This data measures consumers’ ability to spend and their current spending habits. This is important because consumer spending makes up two-thirds of the U.S. economy. It is expected to show that income rose 0.3% and that spending increased 0.3%. Smaller than expected readings would mean consumers had less money to spend and were spending less than thought. That would be good news for bonds and could lead to improvements in mortgage rates.
The revised November reading to the University of Michigan Index of Consumer Sentiment will be posted late Wednesday morning. It will give us a measurement of consumer willingness to spend. If confidence is rising, consumers are more apt to make a large purchase in the near future, fueling economic activity. Analysts are expecting to see little change to the preliminary reading of 64.2. Unless we see a significant variance from the forecasted reading, I don’t think this data will cause much movement in mortgage rates Wednesday.
In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Treasury Notes Tuesday and 7-year Notes on Wednesday. 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 in mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.
The financial markets will be closed Thursday in observance of the Thanksgiving Day holiday. There will not be an early close Wednesday ahead of the holiday, but they will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home. Banks have to be open Friday, but we will likely see little change to mortgage rates that day.
All of the week’s data is being posted over three days due to the Thanksgiving holiday, so the first part of the week should be interesting for mortgage shoppers.
October’s Existing Home Sales data will be posted by the National Association of Realtors late Monday morning. It gives us a measurement of housing sector strength and mortgage credit demand by tracking home resales. This report is expected to show a decline in sales, meaning the housing sector weakened 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 tomorrow’s mortgage rates.
Tuesday has the first revision to the 3rd Quarter Gross Domestic Product (GDP). It is expected to show little change from last month’s preliminary reading of a 2.5% annual rate of expansion. The GDP measures the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic activity. Current forecasts call for a reading of approximately 2.4%, meaning that there was slightly less economic growth during the third quarter than previously thought. This would be good news for the bond market and mortgage rates, but it will likely take a larger decline to improve mortgage rates Tuesday morning.
Also worth noting is the release of the minutes from the last FOMC meeting Tuesday afternoon. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, 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 Tuesday afternoon, but it is more likely there will be little reaction since Fed Chairman Bernanke held a press conference following the most recent meeting.
There are three monthly reports scheduled for Wednesday morning. October’s Durable Goods Orders is the first and will be posted at 8:30 AM ET. This data helps us measure manufacturing strength by tracking orders for big-ticket items, but is known to be quite volatile from month-to-month. It is expected to show a 1.0% decline in new orders. A larger than expected drop would be considered good news for the bond market and mortgage rates as it would indicate manufacturing sector weakness.
The second is October’s Personal Income and Outlays data. This data measures consumers’ ability to spend and their current spending habits. This is important because consumer spending makes up two-thirds of the U.S. economy. It is expected to show that income rose 0.3% and that spending increased 0.3%. Smaller than expected readings would mean consumers had less money to spend and were spending less than thought. That would be good news for bonds and could lead to improvements in mortgage rates.
The revised November reading to the University of Michigan Index of Consumer Sentiment will be posted late Wednesday morning. It will give us a measurement of consumer willingness to spend. If confidence is rising, consumers are more apt to make a large purchase in the near future, fueling economic activity. Analysts are expecting to see little change to the preliminary reading of 64.2. Unless we see a significant variance from the forecasted reading, I don’t think this data will cause much movement in mortgage rates Wednesday.
In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Treasury Notes Tuesday and 7-year Notes on Wednesday. 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 in mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.
The financial markets will be closed Thursday in observance of the Thanksgiving Day holiday. There will not be an early close Wednesday ahead of the holiday, but they will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home. Banks have to be open Friday, but we will likely see little change to mortgage rates that day.
Thursday, November 17, 2011
Wednesday, November 16, 2011
Affordable Housing Can Be Found In Many College Towns
Iconic college towns have affordable average prices of homes, according to the U.S. Home Listing Report released by Coldwell Banker. The report ranks the average price of homes with three bedrooms and two bathrooms across the country, and the affordability in college towns was notable.
The top ten college towns on the Bowl Championship Series rankings released have an average listing price of $302,052, and that is including Palo Alto, CA by Stanford University, an expensive area.
The current BCS Rankings:
1. LSU/Baton Rouge, LA ($194,518)
2. Oklahoma State/Stillwater, OK ($141,728)
3. Alabama/Tuscaloosa, AL (not included)
4. Oregon/Eugene, OR ($244,964)
5. Oklahoma/Norman, OK ($150,313)
6. Arkansas/Fayetteville, AR ($165,643)
7. Clemson/Clemson, SC ($164,836)
8. Virginia Tech/Blacksburg, VA ($258,332)
9. Stanford/Palo Alto, CA ($1,232,070)
10. Boise State, Boise, ID ($166,064)
With the exception of Palo Alto, the average listing price for a 3 BR/2 Bath home in these charming university towns are highly affordable.
The top ten college towns on the Bowl Championship Series rankings released have an average listing price of $302,052, and that is including Palo Alto, CA by Stanford University, an expensive area.
The current BCS Rankings:
1. LSU/Baton Rouge, LA ($194,518)
2. Oklahoma State/Stillwater, OK ($141,728)
3. Alabama/Tuscaloosa, AL (not included)
4. Oregon/Eugene, OR ($244,964)
5. Oklahoma/Norman, OK ($150,313)
6. Arkansas/Fayetteville, AR ($165,643)
7. Clemson/Clemson, SC ($164,836)
8. Virginia Tech/Blacksburg, VA ($258,332)
9. Stanford/Palo Alto, CA ($1,232,070)
10. Boise State, Boise, ID ($166,064)
With the exception of Palo Alto, the average listing price for a 3 BR/2 Bath home in these charming university towns are highly affordable.
Tuesday, November 15, 2011
This Week's Market Commentary
This week brings us the release of six monthly economic reports for the markets to digest. With very important data scheduled for release two different days and relevant data four of the five days, we will likely see a fair amount of volatility in the markets and mortgage pricing this week.
There is nothing scheduled for release Monday, leaving the bond market to movement in stocks and overseas news. As of now it appears we may see some pressure in bonds and a possible increase to mortgage rates tomorrow.
The first data is one of the most important reports of the week. The Commerce Department will give us October’s Retail Sales figures early Tuesday morning. This data measures consumer spending, which is considered extremely important to the markets because it makes up two-thirds of the U.S. economy. It is expected to show a 0.4% rise in spending, meaning consumers spent much less last month than they did in September. A larger increase would be considered negative news for bonds because large increases in spending fuels an economic recovery and raises inflation concerns in the marketplace. If Tuesday’s report reveals a smaller than expected increase in spending, bonds should react favorably, pushing mortgage rates lower. If it shows a larger than expected increase, mortgage rates will likely move higher.
Also Tuesday is the release of October’s Producer Price Index (PPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The PPI measures inflationary pressures at the producer level of the economy. 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 manufacturing level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see a 0.2% decline in the overall reading and a 0.1% increase in the core data.
Wednesday also has two reports scheduled that will likely influence mortgage rates. The first is October’s Consumer Price Index (CPI) at 8:30 AM ET. This index is similar to Tuesday’s PPI, except it measures inflationary pressures at the more important consumer level of the economy. We consider this report as one of the most important reports we get each month. The overall reading is expected to show no change 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 Wednesday.
October’s Industrial Production data will be posted mid-morning Wednesday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.4% increase in production, indicating moderate strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the CPI readings are. A significant surprise in the CPI would likely make this data a non-factor in Wednesday’s mortgage pricing.
Thursday’s only monthly data is October’s Housing Starts. This data gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don’t expect this month’s version to be any different unless it varies greatly from analysts’ forecasts. It is expected to show a sizable decline in starts of new homes.
The final report of the week will come from the Conference Board late Friday morning when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.6% increase, meaning economic activity will rise fairly rapidly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.
Overall, look for Tuesday or Wednesday to be the most important with very important reports scheduled those days. It is difficult to label any particular day as the quietest day, but Thursday is a good candidate. The key releases will be Tuesday’s Retail Sales and Wednesday’s CPI reports. They will probably determine whether rates close the week higher or lower than tomorrow’s opening levels. Since this is likely to be a fairly active week for mortgage rates, it would be prudent to maintain regular contact with your mortgage professional if still floating an interest rate.
There is nothing scheduled for release Monday, leaving the bond market to movement in stocks and overseas news. As of now it appears we may see some pressure in bonds and a possible increase to mortgage rates tomorrow.
The first data is one of the most important reports of the week. The Commerce Department will give us October’s Retail Sales figures early Tuesday morning. This data measures consumer spending, which is considered extremely important to the markets because it makes up two-thirds of the U.S. economy. It is expected to show a 0.4% rise in spending, meaning consumers spent much less last month than they did in September. A larger increase would be considered negative news for bonds because large increases in spending fuels an economic recovery and raises inflation concerns in the marketplace. If Tuesday’s report reveals a smaller than expected increase in spending, bonds should react favorably, pushing mortgage rates lower. If it shows a larger than expected increase, mortgage rates will likely move higher.
Also Tuesday is the release of October’s Producer Price Index (PPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The PPI measures inflationary pressures at the producer level of the economy. 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 manufacturing level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see a 0.2% decline in the overall reading and a 0.1% increase in the core data.
Wednesday also has two reports scheduled that will likely influence mortgage rates. The first is October’s Consumer Price Index (CPI) at 8:30 AM ET. This index is similar to Tuesday’s PPI, except it measures inflationary pressures at the more important consumer level of the economy. We consider this report as one of the most important reports we get each month. The overall reading is expected to show no change 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 Wednesday.
October’s Industrial Production data will be posted mid-morning Wednesday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.4% increase in production, indicating moderate strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the CPI readings are. A significant surprise in the CPI would likely make this data a non-factor in Wednesday’s mortgage pricing.
Thursday’s only monthly data is October’s Housing Starts. This data gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don’t expect this month’s version to be any different unless it varies greatly from analysts’ forecasts. It is expected to show a sizable decline in starts of new homes.
The final report of the week will come from the Conference Board late Friday morning when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.6% increase, meaning economic activity will rise fairly rapidly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.
Overall, look for Tuesday or Wednesday to be the most important with very important reports scheduled those days. It is difficult to label any particular day as the quietest day, but Thursday is a good candidate. The key releases will be Tuesday’s Retail Sales and Wednesday’s CPI reports. They will probably determine whether rates close the week higher or lower than tomorrow’s opening levels. Since this is likely to be a fairly active week for mortgage rates, it would be prudent to maintain regular contact with your mortgage professional if still floating an interest rate.
Monday, November 7, 2011
This Week's Market Commentary
This week brings us the release of only two relevant monthly economic reports but neither of them is considered to be highly important. There are two important Treasury auctions this week that may influence mortgage rates more than the minor economic data that is scheduled.
It is also a holiday-shortened week with the bond market closed Friday in observance of the Veterans Day holiday. The stock markets will be open Friday, but bonds will not be traded meaning that many lenders will be closed.
Neither of this week’s monthly economic reports is expected to lead to noticeable changes in mortgage rates. This means that the stock markets will likely be a significant influence on bond trading and mortgage rates in addition to the two particular Treasury auctions. If the stock markets rally, we could see funds shift from bonds into stocks that potentially offer better returns, leading to higher mortgage rates. If stocks fall from current levels early in the week, bonds and mortgage shoppers should benefit.
The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates.
The first monthly data of the week is September’s Goods and Services Trade Balance report early Thursday morning. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. Analysts are expecting to see a $45.8 billion trade deficit.
November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 61.5, up from October’s final reading of 60.9. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely.
Overall, it is difficult to predict just how active this week will be for mortgage rates. As expected, last week brought us quite a bit of volatility in rates. This week could be very calm or could be just as active as last week was. I don’t believe the economic data on tap will be a catalyst. I think the key will be the stock markets and Wednesday’s Treasury auction. If they give us favorable results, mortgage rates will likely close the week lower than today’s opening levels.
It is also a holiday-shortened week with the bond market closed Friday in observance of the Veterans Day holiday. The stock markets will be open Friday, but bonds will not be traded meaning that many lenders will be closed.
Neither of this week’s monthly economic reports is expected to lead to noticeable changes in mortgage rates. This means that the stock markets will likely be a significant influence on bond trading and mortgage rates in addition to the two particular Treasury auctions. If the stock markets rally, we could see funds shift from bonds into stocks that potentially offer better returns, leading to higher mortgage rates. If stocks fall from current levels early in the week, bonds and mortgage shoppers should benefit.
The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates.
The first monthly data of the week is September’s Goods and Services Trade Balance report early Thursday morning. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. Analysts are expecting to see a $45.8 billion trade deficit.
November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 61.5, up from October’s final reading of 60.9. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely.
Overall, it is difficult to predict just how active this week will be for mortgage rates. As expected, last week brought us quite a bit of volatility in rates. This week could be very calm or could be just as active as last week was. I don’t believe the economic data on tap will be a catalyst. I think the key will be the stock markets and Wednesday’s Treasury auction. If they give us favorable results, mortgage rates will likely close the week lower than today’s opening levels.
Tuesday, November 1, 2011
This Week’s Market Commentary
This week brings us the release of four relevant economic reports for the markets to digest with two of those reports being much more important than the others. In addition to the factual reports, we also have another FOMC meeting to work around this week. This leads me to believe that we will see another active week for mortgage rates.
The first release of the week will come from the Institute for Supply Management (ISM), who will post their manufacturing index at 10:00 AM ET Tuesday. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month, partly because it is the first report every month that tracks the preceding month’s activity. Tuesday’s release is expected to show a reading of 52.1, indicating that manufacturer sentiment rose from September’s level. This means more surveyed business executives felt business improved during the month than in September, hinting at manufacturing sector growth. A smaller than expected reading would be good news for bonds and likely lead to lower mortgage rates Tuesday.
This week’s FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. There is no possibility of the Fed changing key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of when the Fed may make a move, particularly to help boost economic activity. The meeting will adjourn at 12:30 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours. The markets will actually be looking for news of another round of debt purchases by the Fed. If they do announce a sizable purchase program of government or mortgage debt Wednesday, we could see the bond market rally and mortgage rates move noticeably lower.
At 2:15 PM ET Wednesday, Fed Chairman Bernanke will host a press conference to answer questions about the Fed’s action (or lack of). These scheduled press conferences are new and just started this year. They are held four times a year, in an effort to keep the public current on the Fed’s thoughts and concerns. Since the minutes to the meetings aren’t released for a couple weeks after the FOMC meetings, these press conferences allow the press to interact directly with the Fed and in a much more timely manner. Therefore, expect the markets to react to his comments and any surprise answers during the Q&A portion.
Thursday has two reports scheduled. The first is the 3rd Quarter Productivity reading at 8:30 AM ET. It is expected to show a 2.8% increase in worker productivity during the third quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern.
The second report of the day will be September’s Factory Orders data. This report is similar to last week’s Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 0.2% decline in new orders from August’s level. A smaller than forecasted increase would be good news for the bond market and mortgage rates while a larger than expected rise is bad news and could push rates slightly higher Thursday morning since it would indicate economic strength. It is worth noting though, that neither of these reports are considered to be highly important to mortgage rates.
The last report of the week is the most important. Friday brings us the release of one of the most important monthly pieces of economic news- the Employment report. The Labor Department will post October’s employment stats early Friday morning. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate to keep the national unemployment rate at 9.1%, an increase in payrolls of approximately 88,000 and a 0.2% increase in average earnings. Weaker than expected readings should renew concerns about the labor market and rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news.
Overall, the single most important day is likely to be Wednesday or Friday but Tuesday’s data is also considered to be highly important. In addition to the economic reports and the FOMC meeting, I believe stocks will continue to experience volatility that will also impact bond trading. The key to the week will be Friday’s employment numbers or the FOMC statement and press conference, but any significant swings in the stock markets may also influence whether mortgage rates close the week higher or lower than this morning’s levels.
The first release of the week will come from the Institute for Supply Management (ISM), who will post their manufacturing index at 10:00 AM ET Tuesday. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month, partly because it is the first report every month that tracks the preceding month’s activity. Tuesday’s release is expected to show a reading of 52.1, indicating that manufacturer sentiment rose from September’s level. This means more surveyed business executives felt business improved during the month than in September, hinting at manufacturing sector growth. A smaller than expected reading would be good news for bonds and likely lead to lower mortgage rates Tuesday.
This week’s FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. There is no possibility of the Fed changing key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of when the Fed may make a move, particularly to help boost economic activity. The meeting will adjourn at 12:30 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours. The markets will actually be looking for news of another round of debt purchases by the Fed. If they do announce a sizable purchase program of government or mortgage debt Wednesday, we could see the bond market rally and mortgage rates move noticeably lower.
At 2:15 PM ET Wednesday, Fed Chairman Bernanke will host a press conference to answer questions about the Fed’s action (or lack of). These scheduled press conferences are new and just started this year. They are held four times a year, in an effort to keep the public current on the Fed’s thoughts and concerns. Since the minutes to the meetings aren’t released for a couple weeks after the FOMC meetings, these press conferences allow the press to interact directly with the Fed and in a much more timely manner. Therefore, expect the markets to react to his comments and any surprise answers during the Q&A portion.
Thursday has two reports scheduled. The first is the 3rd Quarter Productivity reading at 8:30 AM ET. It is expected to show a 2.8% increase in worker productivity during the third quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern.
The second report of the day will be September’s Factory Orders data. This report is similar to last week’s Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 0.2% decline in new orders from August’s level. A smaller than forecasted increase would be good news for the bond market and mortgage rates while a larger than expected rise is bad news and could push rates slightly higher Thursday morning since it would indicate economic strength. It is worth noting though, that neither of these reports are considered to be highly important to mortgage rates.
The last report of the week is the most important. Friday brings us the release of one of the most important monthly pieces of economic news- the Employment report. The Labor Department will post October’s employment stats early Friday morning. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate to keep the national unemployment rate at 9.1%, an increase in payrolls of approximately 88,000 and a 0.2% increase in average earnings. Weaker than expected readings should renew concerns about the labor market and rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news.
Overall, the single most important day is likely to be Wednesday or Friday but Tuesday’s data is also considered to be highly important. In addition to the economic reports and the FOMC meeting, I believe stocks will continue to experience volatility that will also impact bond trading. The key to the week will be Friday’s employment numbers or the FOMC statement and press conference, but any significant swings in the stock markets may also influence whether mortgage rates close the week higher or lower than this morning’s levels.
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