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February 6th, 2012 12:39 AM

Weekly Rate Lock Advisory

There are only two pieces of monthly economic data scheduled for release this week. Neither of them is considered to be highly important, so we don't have much to pin our hopes on or to be concerned with this week. There are two Treasury auctions on the calendar that may influence mortgage rates the middle part of the week and the second part of Fed Chairman Bernanke’s testimony to Congress, but no important economic data.

Nothing of concern is due today, so look for the stock markets and news from Europe- particularly Greece, to drive the markets today. Fed Chairman Bernanke will speak to the Senate Budget Committee at 10:00 AM Tuesday. I don’t expect him to say anything different than he said last week to the House Budget Committee, but the Q&A portion of his appearance could lead to something new. It is worth watching, but it will probably not lead to a noticeable change in the markets or mortgage rates.

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 one as it will give us a better indication of demand of 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 likely result in upward afternoon revisions to mortgage rates.

With little monthly and no quarterly economic reports being posted, Thursday's weekly release of unemployment figures may end up moving the markets and mortgage rates more than it traditionally does. The Labor Department is expected to announce that 370,000 new claims for unemployment benefits were filed last week, rising slightly from the previous week's total. The higher the number of new claims for benefits, the better the news for the bond market and mortgage pricing as it would indicate weakness in the employment sector.

The first monthly report comes early Friday morning when December's Goods and Services Trade Balance data will be posted. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates. It is expected to show a $48.2 billion trade deficit.

February's preliminary reading to the University of Michigan's Index of Consumer Sentiment will be released late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows an increase in consumer confidence, the stock markets may move higher and bond prices could fall. It is currently expected to come in at 74.0, down from January's final reading of 75.0. That would indicate consumers were less optimistic about their own financial situations than last month and are less likely to make large purchases in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, this would be considered good news for bonds and mortgage pricing.

Overall, despite being a fairly light week in terms of economic releases and relate events, it is still relatively crucial for the mortgage market. We saw the yield on the benchmark 10-year Treasury Note spike higher Friday as a result of the stronger than expected employment data. Stocks rallied as a result of that data, extending the 2012 stock rally that has pushed the Dow up over 5% and the Nasdaq up 11% year-to-date. Both indexes are at their highest levels since May 2008 and December 2000 respectively. This has me believing we are due to see a pullback in stocks fairly soon. If/when this happens, we should see funds shift back into bonds for safety, leading to lower mortgage rates. Keep in mind that this is more or less just speculation, but I am expecting to move to a less conservative approach regarding short-term mortgage rates in the near future.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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.

Posted by Mark Brekhus on February 6th, 2012 12:39 AMPost a Comment (0)

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Weekly Rate Lock Advisory - 1/16/12

January 16th, 2012 11:39 AM

Weekly Rate Lock Advisory

This week brings us the release of five pieces of economic data for the markets to digest, with two of them considered to be highly important for mortgage rates. It is a shortened trading week with the stock and bond markets closed today in observance of the Martin Luther King Jr. holiday. The financial and mortgage markets will reopen Tuesday morning for regular trading hours.

The first report of the week will be posted early Wednesday morning when the Labor Department's Producer Price Index (PPI) will be posted at 8:30 AM ET. The PPI is important to the markets and mortgage rates because it measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.1% increase in the overall reading and a 0.1% increase in the more important core data reading that excludes volatile food and energy prices. A larger than expected increase in the core reading could mean higher mortgage rates Wednesday since inflation is the number one nemesis of the bond market. It erodes the value of a bond's future fixed interest payments, making them less attractive to investors. Accordingly, they are sold at a discount to offset the drop in value, which drives their yields higher. And since mortgage rates follow bond yields, this means higher rates for borrowers.

December's Industrial Production report is also on Wednesday’s agenda with a release time of 9:15 AM ET. This data measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength or weakness. Current forecasts are calling for an increase in production of 0.5% from November's level. A smaller than expected increase would be considered good news for bonds and could help lower mortgage rates, but the PPI is by far the most important data of the day for the bond market and will have the biggest impact on that day's mortgage pricing.

Thursday also has two relevant reports scheduled. December's Consumer Price Index (CPI) at 8:30 AM is the first. This is also one of the most important monthly reports that we see each month since it measures inflationary pressures at the consumer level of the economy. As with the PPI, there are two readings in the release. The overall index is expected to rise 0.1% while the core data is expected to increase 0.1%. Weaker than expected readings should lead to bond improvements and lower mortgage rates Thursday morning.

Last month’s Housing Starts report is the second of the day, also at 8:30 AM. It helps us measure housing sector strength and future mortgage credit demand by tracking construction starts of new homes. It is not considered to be one of the more important releases each month, so I don't see it causing much movement in mortgage rates Thursday, especially since it follows the very important CPI.

Friday has the remaining report, December's Existing Home Sales at 10:00 AM ET. The National Association of Realtors will give us this housing report, which tracks home resales in the U.S. It is expected to show an increase in home sales last month, meaning that the housing sector strengthened. Ideally, the bond market would prefer to see a decline in sales, but a small increase should not negatively affect mortgage rates Friday.

Overall, Tuesday will probably be the least active day for mortgage rates with nothing of relevance scheduled, unless something drastic happens over the holiday. The most important day will likely turn out to be Wednesday or Thursday with the two key inflation readings being released. But the stock markets and news from overseas can be a big influence on bond trading and mortgage pricing any day, so maintaining contact with your mortgage professional is recommended.

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.

Posted by Mark Brekhus on January 16th, 2012 11:39 AMPost a Comment (0)

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Weekly Rate Lock Advisory - 1/9/12

January 9th, 2012 2:50 AM

Weekly Rate Lock Advisory

This week brings us the release of four pieces of economic data to digest along with two important Treasury auctions. None of them are scheduled for today or Tuesday, meaning all of the week's events will come over two and a half days. Until we get to the week's first relevant event Wednesday afternoon, look for the stock markets to be a major contributor to movements in bond prices and mortgage rates. Stock strength will likely equate into bond weakness and higher mortgage rates, and vice versa if stocks fall.

The first relevant report of the week is the Federal Reserve's Beige Book report at 2:00 PM ET Wednesday. This report, which is named simply after the color of its cover, details economic conditions throughout the U.S. 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.

The two important Treasury auctions will be held 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 for demand of 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 result in upward revisions to mortgage rates.

Thursday has December's Retail Sales data scheduled, which is the most important report of the week and one of the more watched releases we get each month. This Commerce Department report measures consumer spending by tracking sales at retail establishments in the U.S. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts are calling for an increase in sales of approximately 0.4%. 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.

The last two reports will be posted Friday morning. The first is November's Goods and Services Trade Balance at 8:30 AM ET. It the week's least important data and probably will not influence mortgage rates. It measures the size of the U.S. trade deficit and is expected to show a $44.3 billion trade deficit. This data usually does not directly affect mortgage rates, but it does influence the value of the U.S. dollar versus 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. But unless we see a significant variance from forecasts, I don't believe this data will lead to a change in mortgage rates Friday.

The final report of the week is January's preliminary reading to the University of Michigan's Index of Consumer Sentiment. 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.

Overall, Thursday will likely turn out to be the most important day of the week due to the Retail Sales report but Wednesday’s Beige Book and 10-year Note auction may also cause some volatility in the markets. However, any day 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.

Posted by Mark Brekhus on January 9th, 2012 2:50 AMPost a Comment (0)

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Weekly Rate Lock Advisory - 1/3/12

January 3rd, 2012 12:21 PM

Weekly Rate Lock Advisory

Tuesday’s bond market has opened well in negative territory as stocks start the new year with a rally. Stocks are reacting strongly to economic news from overseas that is favorable for stocks and negative for bonds. The Dow is currently up 239 points while the Nasdaq has gained 56 points. The bond market is currently down 22/32, which will likely push this morning’s mortgage rates higher by approximately .125 - .250 of a discount point. Limiting this morning’s increase is strength from trading late Friday ahead of the holiday break.

The Institute for Supply Management (ISM) gave us this morning’s economic news, announcing that their manufacturing index for December rose to 53.9. This was an increase from November’s reading and a little higher than forecasts, indicating manufacturing sector strength. That makes the report negative for bonds and mortgage rates, but the variance was not enough to fuel this morning’s stock rally. In fact, stocks were posting sizable pre-market gains long before the report was released.

Later today, we will get the minutes from the last FOMC meeting. This will give market participants insight to the Fed's thinking and concerns regarding the economy, inflation and monetary policy. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they won't affect the markets or mortgage rates until afternoon hours.

The Commerce Department will post November's Factory Orders data late tomorrow morning, giving us another indication of manufacturing sector strength. It is similar to the Durable Goods Orders release that was posted late last week, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see an increase of 2.1% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a minor change in rates. The smaller the increase, the better the news for mortgage rates.

Overall, the key data of the week will be Friday's Employment report. As we have seen this morning, stocks will likely play a major role in bond trading and mortgage rates movement. We are off on the wrong foot so far this week, but Friday’s data can easily erase a traditional week’s losses or gains in mortgage rates. As long as it shows results that are favorable to bonds, we should see mortgage rates close the week lower than this morning’s levels.

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.

Posted by Mark Brekhus on January 3rd, 2012 12:21 PMPost a Comment (0)

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Weekly Rate Lock Advisory - 12/12/11

December 12th, 2011 10:57 AM

Weekly Rate Lock Advisory

This week is fairly busy in terms of the number of economic releases and other events scheduled that may influence mortgage rates. There are only four pieces of economic data for us to watch, but three of them are highly important to the markets. In addition to the economic reports, we also have the last FOMC meeting of the year and two important Treasury auctions that are likely to impact bond trading and mortgage pricing. Those events, coupled with the likelihood of further overseas developments from Europe and possibly others, make it highly likely that we will see plenty of movement in the markets and mortgage rates this week.

There is nothing of relevance scheduled for today. This means we can expect the stock markets to drive bond trading and mortgage rates again. If the major stock indexes open the week with gains this morning, bonds may move lower, pushing mortgage rates higher. But a weak open in stocks could lead to slightly lower mortgage rates today. We could also see traders position themselves ahead of the week’s agenda, so even though there is nothing concerning on the calendar, we could see mortgage rates change.

Tuesday has two important events, starting with November's Retail Sales report. This 8:30 AM ET release will give us a key measurement of consumer spending by tracking sales at retail level establishments. This data is highly important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rapidly rising consumer spending raises the possibility of seeing solid economic growth. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in retail sales will likely drive bond prices lower and mortgage rates higher Tuesday. Current forecasts are calling for an increase of 0.6% in November’s sales.

The last FOMC meeting of the year will also be held Tuesday, adjourning at 2:15 PM ET. There is not much debate about what the Fed will do at this meeting with no chance of them raising key short-term interest rates. Therefore, the post meeting statement will likely be the sole source of a market reaction. This statement has the potential to have a significant influence on the markets and mortgage rates as investors look for any indication of what and when the Fed may do next. One potential move would be more debt purchases by the Fed. An announcement of another round of quantitative easing (QE3) could help boost bond prices and improve mortgage rates Tuesday afternoon. Besides that, it is believed that there isn’t much more the Fed can do to help boost economic activity.

There are Treasury auctions scheduled for several days this week, but the two important ones are the 10-year Note sale Tuesday and the 30-year Bond sale Wednesday. Tuesday's auction is the more important of the two and will likely influence mortgage rates more. Results of each sale will be posted at 1:00 PM ET. If they were met with a strong demand from investors, particularly international buyers, we should see afternoon strength in bonds and improvements to mortgage pricing those days. On the other hand, a weak interest in the auctions could lead to upward revisions to mortgage rates during afternoon hours.

Wednesday has little to be concerned with, except for the 30-year Bond auction. November's Producer Price Index (PPI) will be posted early Thursday morning. It 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 Thursday's release reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and drive mortgage rates higher. If we see in-line or weaker than expected numbers, the bond market should respond well and mortgage rates should fall. Current forecasts are showing a 0.2% increase in the overall index and a 0.1% rise in the core data.

November's Industrial Production data is also scheduled to be posted Thursday morning, but a little later than the PPI. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting it to show a 0.2% increase in output, indicating modest manufacturing growth. A smaller than expected rise would be good news for bonds, while a stronger reading may result in slightly higher mortgage pricing. However, the PPI release is more important to the markets than this data is.

The week's most important economic data comes Friday morning when November's Consumer Price Index (CPI) is posted. It is similar to Thursday's Producer Price Index, except it tracks inflationary pressures at the more important consumer level of the economy. Current forecasts call for an increase of 0.1% in the overall index and a 0.1% rise in the core data reading. The core data is watched more closely because it excludes more volatile food and energy prices, giving a more stable reading for analysts to consider. This data is one of the most watched inflation indexes, which is extremely important to long-term securities such as mortgage related bonds. Rising inflation erodes the value of a bond's future fixed interest payments, making them less appealing to investors. That translates into falling bond prices and rising mortgage rates.

Overall, I am expecting to see a much more active week in the financial markets and mortgage pricing than last week. The most important day of the week is either Tuesday or Friday due to the reports being posted those days and the FOMC meeting scheduled. Please maintain contact with your mortgage professional if you have not locked an interest rate yet because we may see sizable changes to mortgage pricing more than one day this week.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock 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.

Posted by Mark Brekhus on December 12th, 2011 10:57 AMPost a Comment (0)

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Weekly Rate Lock Advisory - 12/05/11

December 5th, 2011 8:53 PM

Weekly Rate Lock Advisory

This week is fairly light in terms of the number of economic releases scheduled for release. There are only three monthly or quarterly reports on the agenda that have the potential to influence mortgage rates and none of them are considered to be highly important. That means that the stock markets could be the focal point multiple days, especially the middle part of the week.

October's Factory Orders is the first, coming this morning. This report is similar to the Durable Goods Orders report that was released the week before last, except this one includes manufacturing orders for both durable and non-durable goods. This data usually isn't a major influence on bond trading, but with little data this week that can impact mortgage rates, it could draw more attention than usual. Analysts are expecting to see a decline in new orders of approximately 0.4%. The larger decline, the better the news for bond prices and mortgage rates because it would signal manufacturing sector weakness.

There is no other relevant economic news scheduled for release until Friday morning. October's Goods and Services Trade Balance report will be posted early Friday morning. This report gives us the size of the U.S. trade deficit, but it is considered to be of low importance to mortgage rates. It is expected to show a $44.0 billion trade deficit. Unless it varies greatly from forecasts, I don't expect this data to affect mortgage pricing Friday.

Also Friday is the release of December's preliminary reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly. Consumer sentiment or confidence is tracked because the more comfortable consumers are about their own financial situations, the more likely they are to make a large purchase in the near future. Since consumer spending makes up two-thirds of the economy, any related data is watched closely. Friday’s release is expected to show a reading of 65.0, which would be an increase from last month's final reading. A decline in confidence would be considered good news for the bond market and mortgage rates.

Overall, I think tomorrow will probably bring us the most movement in rates as the markets digest weekend news. I don't believe we will see as much volatility in the stock markets as we saw last week though. Interestingly, despite the sizable rally in stocks last week, mortgage rates didn’t take much of a hit. Even though mortgage bonds showed resilience last week, I still think that the upward risk outweighs the likelihood of seeing noticeable improvements in rates in the immediate future. Therefore, I recommend maintaining contact with your mortgage professional 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... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock 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.

Posted by Mark Brekhus on December 5th, 2011 8:53 PMPost a Comment (0)

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Weekly Rate Lock Advisory - 11/07/11

November 7th, 2011 11:33 PM

Weekly Rate Lock Advisory

Monday’s bond market has opened up slightly due to early stock weakness. The stock markets are starting the week in negative ground. The Dow is currently down 39 points while the Nasdaq is down 27 points. The bond market is currently up 4/32, which will likely improve this morning’s mortgage rates by approximately .125 of a discount point form Friday’s morning pricing.

There is nothing of relevance scheduled for release today, so look for any changes to mortgage rates to be a result of significant movement in stocks. As long as the major stock indexes remain close to current levels, mortgage rates should follow suit this afternoon.

The rest of the 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.

The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The economic data that is being posted will be released Thursday and Friday mornings. It is difficult to predict just how active this week will be for mortgage rates, but I suspect it will be fairly quiet a good part of the week. 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.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock 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.

Posted by Mark Brekhus on November 7th, 2011 11:33 PMPost a Comment (0)

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Weekly Rate Lock Advisory - 10/31/11

November 7th, 2011 11:32 PM

Weekly Rate Lock Advisory

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.

There is nothing of relevance scheduled for tomorrow. In fact, it is the only day of the week that doesn’t have something that we need to watch. The stock markets are likely to be the biggest influence on bond trading and mortgage pricing. Although, the rest of the week does have some major events, so investors may stand on the sidelines until we get to those reports, etc.

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 tomorrow morning's levels.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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.

Posted by Mark Brekhus on November 7th, 2011 11:32 PMPost a Comment (0)

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Weekly Rate Lock Advisory - 10/10/11

October 10th, 2011 1:50 PM

Weekly Rate Lock Advisory

This week brings us the release of three economic reports that are of interest to the mortgage market along with the minutes from the last FOMC meeting and two important Treasury auctions. The week also gets heavy in quarterly earnings releases for companies, which could cause significant movement in the stock markets. The earnings results could affect bond trading as investors move funds into stocks if the reports are good. The other possibility is that earnings would generally disappoint, meaning investors may move funds out of stocks and into bonds as a safe-haven. The latter would be good news for the bond market and mortgage rates.

The bond market is closed today in observance of the Columbus Day holiday and will reopen Tuesday morning. There will be no update to this report today due to the bond market being closed. The stock markets are open for trading tomorrow, so their movement is worth watching as a sizable move up or down in the major indexes may influence bond trading and mortgage pricing early Tuesday morning. I suspect many mortgage lenders will be closed today, as will U.S. banks. If anyone is open for business and does post rates today, you can expect to see an increase of approximately .125 of a discount point from Friday's morning pricing due to weakness in bonds late Friday afternoon.

The first report of the week comes at 2:00 PM ET Wednesday afternoon when the Fed releases the minutes from their last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over the economy, inflation and the Fed's next move. If Fed members were concerned about the economy slipping into another recession, we may see the bond market move higher and mortgage rates lower Wednesday afternoon. It will be interesting to see how much debate and disagreement amongst members took place during the meeting. Also, investors will be looking for any indication of what the Fed may do next to help boost economic activity. I suspect that we will see some movement in the markets as a result of this release Wednesday afternoon.

Also Wednesday is the first of two important Treasury auctions this week. The sale of 10-year Notes will be held Wednesday while 30-year Bonds will be sold Thursday. We often see some weakness in bonds ahead of the sales as the firms participating prepare for them. However, as long as the auctions are met with decent demand from investors, the firms usually buy them back. This tends to help recover any presale losses. But, if the sales are met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM each sale day.

August's Trade Balance report will be released early Thursday morning. It gives us the size of the U.S. trade deficit but is the week's least important report and likely will have little impact on the bond market and mortgage rates. Analysts are expecting to see a $46.1 billion deficit, but it will take a wide variance to directly influence mortgage pricing.

The week closes with two reports being posted Friday morning, one of which is extremely important to the markets and mortgage rates. That one would be September's Retail Sales report that measures consumer spending. This data is very important to the markets because consumer spending makes up two-thirds of the U.S. economy. Therefore, any related data is considered to be highly important. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates should drop. However, stronger than expected sales would fuel optimism about the economy and would likely lead to a stock rally that hurts bonds prices and pushes mortgage rates higher. Current forecasts are calling for a 0.7% increase in sales. Good news for the bond market and mortgage pricing would be a much smaller increase.

The last report of the week is October's preliminary reading to the University of Michigan's Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. Good news for the bond market would be a sizable decline in consumer confidence, but due to the importance of the day's other report, I suspect this data will have little impact on mortgage rates. It is expected to show a reading of 60.0, up from September's final of 59.4.

Overall, I am expecting to see a fair amount of movement in mortgage rates this week, especially the latter part of the week. The key economic report is Friday’s Retail Sales data but the FOMC minutes also have the potential to heavily influence the markets. Therefore, we can label Wednesday or Friday as the most important day of the week. Also worth noting is the active week for corporate earnings that can cause a great deal of volatility in stocks and mortgage rates any day of the week. Accordingly, please proceed cautiously and maintain contact with your mortgage professional if you have not locked an interest rate yet.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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.

Posted by Mark Brekhus on October 10th, 2011 1:50 PMPost a Comment (0)

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Weekly Rate Lock Advisory - 9/19/11

September 20th, 2011 5:54 AM

Weekly Rate Lock Advisory

Monday’s bond market has opened in positive territory due to early stock weakness. The stock markets are in selling mode during morning trading due mostly to concerns about overseas financial issues. The Dow is currently down 209 points while the Nasdaq has lost 32 points. The bond market is currently up 23/32, which will likely improve this morning’s mortgage rates by approximately .250 - .375 of a discount point.

There is no relevant economic data scheduled for release today. As expected, the bond market is being influenced by stock movement. With the major stock indexes posting sizable losses, bonds are benefiting as investors seek safe-haven from the volatility. If stocks extend this morning’s losses, we could see further improvements to mortgage rates this afternoon.

The rest of the week brings us the release of only three monthly reports that are relevant to mortgage rates in addition to another FOMC meeting. The first is August's Housing Starts early tomorrow morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand by tracking construction starts of new homes, but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show a decline in new home starts between July and August. I believe we need to see a significant surprise in this data for it to have a noticeable impact on mortgage rates tomorrow.

This week’s FOMC meeting begins tomorrow and is a two-day meeting. Mr. Bernanke and friends will adjourn at 2:15 PM ET Wednesday. There is no chance of seeing any type of change to key short-term interest rates. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find when the Fed's next move may come. Market participants are anxiously waiting to hear what the Fed has in mind to help stimulate economic activity. Many feel that there isn’t much that they can do at this point to quickly boost economic growth. This was originally scheduled to be a single day meeting, but was extended to a two-day meeting to allow more time for them to discuss their options. Needless to say, it will be an interesting afternoon Wednesday when the post-meeting statement is read.

Overall, there really isn’t a specific report that stands out as the most important of the week. The most important day is Wednesday with the Existing Home Sales report and the FOMC meeting, but I don't believe any of this week's economic data has the potential to move the markets or mortgage rates heavily. However, we still may see some changes in rates day-to-day, especially if the stock markets show more volatility. If still floating an interest rate, continued contact with your mortgage professional is recommended, especially the middle part of the week.

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.

Posted by Mark Brekhus on September 20th, 2011 5:54 AMPost a Comment (0)

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