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This week brings us the release of four pieces of economic data, with three of them likely to affect mortgage rates. The most important reports are all scheduled for release Friday, so look for the biggest changes to rates the latter part of the week.
The first report of the week is not considered to be of high importance. July's Goods and Services Trade Balance data will be posted Tuesday morning, giving us the size of the U.S. trade deficit. It is expected to show a deficit of approximately $59.0 billion, which would be an increase from June's $58.1 billion. However, I would consider this the least important of this week's releases, meaning it will likely have little impact on bond trading or mortgage rates.
Also worth noting is the 10-year Treasury Note auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. But, if the sales are met with a decent demand from investors, those losses are normally recovered after the results are announced. The results will be posted at 1:00 pm ET Thursday. If demand was strong, particularly from international investors, we should see mortgage rates improve Thursday afternoon.
Friday brings us the release of three pieces of relevant data. The first is the release of August's Retail Sales report. It will give us a measurement of consumer spending, which is very important to the markets because consumer spending makes up two-thirds of the U.S. economy. Current forecasts are calling for a 0.5% increase in sales last month after July's 0.3% rise. If we see a higher level of spending than is forecasted, the bond markets will most likely fall and mortgage rates will rise. However, a weaker than expected reading could push bond prices higher and mortgage rates lower Friday.
The second report of the day is August's Industrial Production report. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important but could cause movement in mortgage rates. Analysts are currently expecting to see a 0.3% increase in production. A higher level of output could lead to higher mortgage rates, while a weaker than expected figure should help push rates lower.
The last report of the week comes from the University of Michigan. Their consumer sentiment index will give us an indication of consumer confidence, which hints at consumers' willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial situations, they probably will delay making that large purchase. This influences future consumer spending data and can impact the financial markets. It is expected to show a reading of 83.5.
Overall, this will likely be a pretty active week for the bond market and mortgage rates. Friday's Retail Sales report is the week's single most important. If we see weaker than expected readings in that data, we should see mortgage rates move lower for the week. However, a stronger than expected reading would likely drive bond prices lower and mortgage rates higher. I am holding the float recommendations for now, but could change if there is a lackluster interest in the 10-year auction or if the sales report shows stronger than expected results. E may also see the stock markets significantly influence bond trading, so look for sizable movement in the major indexes to also lead to a possible change in recommendations.
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.
Please let me know if I can provide loan information for any of your clients. I would be happy to quickly pre-qualify them, provide loan scenarios, or help improve their credit position to obtain a lower interest rate.
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