This week will be interesting for the bond market and mortgage rates. There are six economic reports scheduled for the financial and mortgage markets to digest, with all coming the middle or latter part of the week. In addition, one of the reports is considered to be of extremely high importance to the financial and mortgage markets. This makes it quite possible that mortgage rates will show noticeable movement again this week.
The Federal Reserve will release its Beige Book report Wednesday afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. With Fed Chairman Ben Bernanke's testimony last week, I don't think we will see any significant surprises in this report, and therefore will likely not cause much movement in mortgage rates Wednesday afternoon.
Thursday morning's economic data will come from the Commerce Department when they will post June's Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for a gain of 2.0% after showing a sizable loss in new orders during May. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items. These are products that are expected to last at least three years. A stronger than expected number may lead to higher mortgage rates Thursday morning. If it reveals a smaller than expected rise or a decline, mortgage rates should drop Thursday morning.
Friday morning brings us the release of the single most important report we see regularly. The quarterly Gross Domestic Product (GDP) is considered to be the best indicator of economic growth. It is the sum of all goods and services produced in the U.S. and usually has a great deal of influence on the financial markets. Current forecasts are estimating to see a 3.2% pace. A larger increase will probably hurt bond prices, leading to higher mortgage rates. But a smaller increase would likely fuel a bond market rally.
Also being released Friday is the final revision to July's University of Michigan Index of Consumer Sentiment. Unless we see a drastic revision to the preliminary estimate of 92.4, I think the markets will probably shrug this news off due to the importance of the GDP.
The week's data is rounded off with two housing sector related releases Wednesday and Thursday, but I don't think they will have much of an impact on the bond market or mortgage rates. June's Existing Home Sales will be posted Wednesday while New Home Sales will be released Thursday. I would expect that other reports or factors will drive bond trading and mortgage pricing much more than these will.
Overall, this is another fairly significant week for the bond market and mortgage rates. If we get weaker than expected economic results, we may see mortgage rates make another leg lower. However, stronger than expected results will likely lead to higher rates for the week. With the bond market just recently falling below the important 5.000% threshold, I am holding the float recommendations, but if the yield does not continue to move lower, I likely will be shifting to a lock recommendation.
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... 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.
©Mortgage Commentary 2007