There are four reports that are expected to be released this week that may concern mortgage rates depending on its economic data. Also, two important treasury auctions will take place. The Stock Market will be a major contributor early in the week for any movements in bond prices and mortgage rates.
At 2:00 PM ET on Wednesday, the Federal Reserve's Beige Book Report will be released. It will give details of the economic condition throughout the US by region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises, particularly regarding inflation, unemployment or future hiring.
Wednesday and Thursday bring the treasury auctions featuring the sale of 10-year-notes and 30-year-bonds. The 10-year sale is the more important of the two as it will give us a better indication for demand of mortgage-related securities. If there is 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 result in upward revisions to mortgage rates.
On Thursday, the most important report of the week is released: December's Retail Sales data. This comes from the Commerce Department. The report measures consumer spending and tracks tracks sales at retail establishments. Customer spending makes up two-thirds of the U.S. economy so this data is watched carefully. A sales increase of 0.4% is expected. A smaller than expected increase in sales would indicate consumers did not spend as much as thought over the holiday season, helping to prevent rapid economic growth. That would be considered good news for the bond market and mortgage rates.
Friday morning will bring us the last two reports. November's Goods and Services Trade Balance comes at 8:30 AM ET. This is the least important report and isn't expected to effect mortgage rates. It measures the size of the U.S. trade deficit and is expected to show a $44.3 billion trade deficit and would only effect the measure of the U.S. dollar against 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.
Also on Friday, January's preliminary reading to the University of Michigan's Index of Consumer Sentiment will be released. This index measures consumer willingness to spend and often has enough of an impact on the financial markets to slightly change mortgage rates. Good news would be if it shows a reading weaker than the 75.0 that is expected. December's final reading was 71.0, indicating that consumer sentiment likely rose this month. The bond market prefers to see waning confidence because if consumers are less optimistic about their own financial situations, they are less apt to make large purchases in the near future. Slowing spending levels limits fuel for economic growth, making long-term securities such as mortgage bonds more attractive to investors.
Any day this week can become active if the stock markets show significant gains or losses. Therefore, I strongly recommend maintaining contact with your mortgage professional this week, especially the latter part 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... 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... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Monday, January 9, 2012
News for the Week of Jan 8th: Reports and Auctions
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