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This week brings us the release of only three pieces of economic news in addition to the minutes from the last FOMC meeting. Only one of those three can be considered of high importance to the markets and mortgage rates, so we may see a fairly calm week for mortgage rates.
The first data comes tomorrow morning with the release of April's Leading Economic Indicators (LEI) at 10:00 AM ET. This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show no change from March's reading, meaning that economic activity is likely to remain flat during the next few months. A decline would be good news for the bond market and mortgage rates, while an increase could cause mortgage rates to inch higher tomorrow.
The second report of the week April's Producer Price Index (PPI) Tuesday morning, which helps us measure inflationary pressures at the producer level of the economy. If this report reveals we aker than expected readings, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.4%, while the core data that excludes food and energy prices is expected to rise 0.2%. A smaller than expected increase in the core data would be ideal for mortgage shoppers.
There is no relevant economic news scheduled for release Wednesday, but we will get to see the minutes from the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy. The goal is to form a guess about what the Fed's next move will be. The minutes will be released at 2:00 PM ET, so if there is a market reaction to them it will be evident during afternoon trading.
The National Association of Realtors will give us the Existing Home Sales report Friday morning. This data tracks resales of homes in the U.S., giving us a measurement of housing sector strength. However, it is not considered to be of much importance to the bond market unless it varies greatly from forecasts. Current forecasts are calling for decline in sales between March and April.
Overall, it may be an interesting week for mortgage rates. We could see little movement in rates if the stock markets remain calm and the week's data doesn't reveal any major surprises. Tuesday's PPI report is the single most important data of the week, but the FOMC minutes may also lead to some volatility in the markets. Also worth noting is an early close in the bond market Friday afternoon ahead of the Memorial Day Holiday Monday. These early closes sometimes lead to additional volatility bond prices as investors prepare for the long weekend and trading thins with many traders starting the weekend early.
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 taki ng 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 2008
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