Mortgage Market Update

Monday’s bond market has opened in positive territory, erasing part of Friday’s intra-day losses. The stock markets are mixed with the Dow down 7 points and the Nasdaq up 4 points. The bond market is currently up 6/32, but due to significant selling Friday afternoon, we will still see an increase of approximately .250 of a discount point if comparing to Friday’s morning pricing.

There is nothing of relevance scheduled for release today that has the potential to influence mortgage rates. The rest of the week brings us the release of three reports that do, in addition to the minutes from the most recent FOMC meeting and a congressional speaking engagement by Fed Chairman Bernanke. Only one of the economic reports is considered to be highly important to the markets and mortgage rates, but the others do carry enough significance to influence mortgage rates if they show a wide variance from forecasts.

Tomorrow also has nothing of importance scheduled, so look for stock movement to heavily influence bond trading and mortgage rates. Stock gains will probably pressure bonds and cause mortgage rates to move higher. If the major stock indexes show losses during the first couple days, we may see bonds thrive and mortgage rates remain unchanged or move slightly lower. It will also be interesting to see if last week’s pattern of afternoon selling in bonds carries into this week. Early gains in bonds this morning raises caution that it may. Therefore, proceed cautiously if still floating an interest rate and closing in the immediate future as the afternoon selling, for the most part, has been stronger than the morning buying. In other words, the afternoon revisions have been higher than the morning improvement s to rates.

Wednesday has three events that could affect mortgage rates. They include April’s Existing Home Sales report and Fed Chairman Bernanke’s appearance in front of Joint Economic Committee of Congress, both at 10:00 AM ET. That will be followed by the release of the minutes from the last FOMC meeting at 2:00 PM ET.

Overall, I believe Wednesday will be the most important day of the week for mortgage rates, although Friday should be active also as it has the most important economic report and will have an early bond market closing ahead of next Monday’s holiday.

Mortgage Market Update

This week brings us the release of seven economic reports that may have the potential to influence mortgage rates. There is data scheduled to be posted four of the five days, including today. We saw plenty of movement in rates last week despite the lack of factual economic reports. Unfortunately for mortgage shoppers, they moved higher and this week may not be any different. Therefore, please proceed cautiously as this could be another ugly week for rates if the data gives us stronger than expected results.

The first piece of data this week is April's Retail Sales at 8:30 AM ET Monday morning. This is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up over two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.3% decline in sales from March to April. A weaker than expected level of sales should push bond prices higher and mortgage rates lower Monday morning as it would signal that economic activity may not be as strong as thought. However, an unexpected increase could renew theories of economic growth that would lead to more stock buying and bond selling that would push mortgage rates higher.

There is nothing of relevance scheduled for Tuesday, but Wednesday has two reports that we will be watching. April's Producer Price Index (PPI) is the first at 8:30 AM ET. It helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond market improve. The overall index is expected to fall 0.5%, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.1%. A decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds. As inflation rises, longer-term securities become less appealing to investors since inflation erodes the value of those securities’ future fixed interest payment. That is why the bond market tends to thrive in weaker economic conditions with low levels of inflation.

The second report of the day Wednesday is April's Industrial Production at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.2% decline in production, indicating that manufacturing activity is growing. A larger than expected decrease in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is considered to be moderately important, so it will likely need to show unexpected strength or weakness to cause movement in mortgage rates. The PPI report will probably be the biggest influence on bond trading and mortgage rates Wednesday.

April's Consumer Price Index (CPI) will also be posted at 8:30 AM ET Thursday. It is the sister report of Wednesday’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and could lead to significant volatility in the bond market and mortgage pricing if they show any surprises. Current forecasts are calling for a 0.2% decline in the overall index and a 0.2% rise in the core data reading. As with the PPI, the core data is the more important of the two readings and will help dictate mortgage rate direction.

Also early Thursday will be the release of April's Housing Starts. This data measures housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show a drop in new starts from March's reading, hinting at housing sector weakness. However, since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts, especially with a key measurement of inflation being posted at the same time.

The last two pieces of data come late Friday morning. May's preliminary reading to the University of Michigan's Index of Consumer Sentiment will be released just before 10:00 AM ET Friday. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident in their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 78.5, which would be an increase from April’s final reading, indicating consumers are more confident and more likely to spend than they were last month. If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower because waning confidence means consumers are less apt to make a large purchase in the near future.

The week’s calendar closes with the release of April's Leading Economic Indicators (LEI) at 10:00 AM ET Friday. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.3% increase from March's reading, meaning that economic activity is likely to strengthen slightly over 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 Friday.

Overall, it is likely going to be an active week for the financial and mortgage markets. I am predicting Monday or Thursday will be the most important day for mortgage rates, but we could see noticeable movement in rates multiple days this week. The lightest day will likely be Tuesday unless it is an overly volatile day for stocks.

Mortgage Market Update

This week has little scheduled that is expected to drive bond trading and mortgage rates. There are no relevant monthly or quarterly economic reports on the calendar. In fact, the only economic news even worth watching is the weekly unemployment update from the Labor Department that usually draws little attention. We do, however, have two Treasury auctions that can potentially affect rates the middle part of the week.

Friday’s Employment report led to a significant sell-off in bonds and a large spike in mortgage rates. With nothing scheduled to help bond traders forget about Friday’s selling, the negative tone in stocks could carry into tomorrow’s trading. This is especially true if stocks open the week in positive ground. In other words, we could be in for further increases to mortgage rates the next day or two.

The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sale, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing those afternoons. After Friday’s selling, it is difficult to portray a scenario that gives us high hope for these auctions. At best, I believe we will be fortunate if they are a non-factor towards mortgage rates.

The week closes with a speaking engagement from Fed Chairman Bernanke mid-morning Friday. He will be speaking at a Fed banking conference in Chicago. Since this is the first time he will be public since last Friday’s employment news and the reaction the markets had, look for his words to cause a little volatility in the broader markets, and possibly mortgage rates.

Due to the lack of factual economic data to drive the markets this week, we should see bond trading and mortgage pricing to be heavily influenced by stock market direction. If the major stock indexes move higher, mortgage rates will probably follow suit. Ideally, mortgage shoppers should hope for stock market weakness as it would be the best scenario for mortgage rates to take back some of Friday’s increases.

Overall, I think we will see Monday to be a fairly active day as Friday’s stock and bond market sentiment will probably carry into today’s trading. That will likely mean we start off the week with an increase in mortgage rates, but to a much smaller scale as last Friday’s move. Wednesday’s 10-year Treasury Note auction could also cause movement in rates during afternoon hours.

Mortgage Market Update

This week is quite busy in terms of the number of economic reports and other events scheduled and the significance of the data being released. There are eight pieces of economic data that may influence mortgage rates along with a two-day FOMC meeting. There is relevant data being released every day of the week, so expect to see plenty of movement in mortgage rates the next five days.

March's Personal Income and Outlays data is the first of the economic releases, coming early this morning. It helps us measure consumers' ability to spend and current spending habits, which is important to the mortgage market due to the influence that consumer spending-related data has on the financial markets. If a consumer's income is rising, they are more likely to make additional purchases in the near future, fueling economic growth. This raises inflation concerns and has a negative impact on the bond market and mortgage rates. Current forecasts are calling for a 0.3% increase in the income reading and a 0.1% rise in spending. If we see smaller than expected readings, the bond market should open higher today, making an improvement to mortgage rates a good possibility.

The second report of the week is the 1st Quarter Employment Cost Index (ECI) early Tuesday morning that tracks employer costs for wages and benefits. This gives us a measurement of wage-inflation. If it shows a large increase, we may see wage inflation concerns rise as employers will need to pass those increases into the pricing of their products and services. That would cause the bond market to fall and mortgage rates to rise. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.5%.

April's Consumer Confidence Index (CCI) will also be released Tuesday morning, but at 10:00 AM ET. This index is considered to be key indicator of future spending by consumers. The group surveys 5,000 consumers from across the country about their personal financial situations. If sentiment is strong or rising, it is believed that consumers are more apt to make large purchases in the near future. However, if they are concerned about issues such as job security and savings, they will probably delay making large purchases. The latter is better for the bond market and mortgage rates because the expected slowdown in spending would keep inflation and economic growth concerns to a minimum. On the other hand, a sizable increase could hurt the bond market, pushing mortgage rates higher Tuesday. It is expected to show a reading of 61.0, which would be an increase from March's 59.7 reading. The lower the reading, the better the news it is for mortgage rates.

The Institute for Supply Management (ISM) will post their manufacturing index for April late Wednesday morning. This is usually the first important economic report released each month and gives us an indication of manufacturer sentiment. A reading above 50 means that more surveyed trade executives felt business improved during the month than those who felt it had worsened. This points toward more manufacturing activity and could hurt bond prices, pushing mortgage rates higher. Analysts are expecting to see a reading of 51.0, which would be a slight decline from March's 51.3. Ideally, bond traders would like to see a reading below 50.0 as it would hint at contraction in the manufacturing sector rather than growth.

This week's FOMC meeting will begin Tuesday but will not adjourn until Wednesday afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the 2:15 PM ET post-meeting statement. If the statement gives any hint of change in their current forecasts on when they expect to adjust key short-term interest rates, we could see a sizable change to mortgage rates Wednesday afternoon.

Thursday has two pieces of monthly or quarterly economic reports scheduled, but neither is considered to be highly important. The first comes from the Labor Department, who will release its 1st Quarter Productivity and Costs data early Thursday morning. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rapidly rising, the bond market should react favorably. However, a smaller increase than what is forecasted could cause bond prices to drop and mortgage rates to rise slightly Thursday morning. It is expected to show a 1.2% increase in productivity.

March's Goods and Services Trade Balance report will also be released early Thursday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $43.5 billion trade deficit, but it is the least important of this week's data and likely will have little influence on Thursday's mortgage rates.

Friday brings us the release of the almighty monthly Employment report, giving us April's employment statistics. This is where we may see a huge rally or major sell-off in the bond market and potentially large changes in mortgage rates. The ideal situation for the bond and mortgage markets would be an increase in the unemployment rate and a much smaller number of payrolls added to the economy during the month than was expected. Just how much of an improvement or worsening in rates depends on how much variance there is between forecasts and actual readings. This could turn out to be a wonderful day in the mortgage market, but it also carries risks of seeing mortgage rates move higher if the Labor Department posts stronger than expected readings. Current forecasts are calling for the unemployment rate to remain at 7.6% and that approximately 150,000 jobs were added during the month.

March's Factory Orders data will be posted late Friday morning, giving us another measure of manufacturing sector strength or weakness. It is similar to last week's Durable Goods Orders, except this report includes non-durable goods such as food and clothing. Generally, the market is more concerned with the durable goods orders like refrigerators and electronics than items such as cigarettes and toothpaste. This is why the Durable Goods report usually has more of an impact on the financial markets than the Factory Orders report does. Still, a noticeably larger decline than the 2.5% that is expected could push mortgage rates slightly lower if the employment data matches forecasts.

Overall, I believe Friday will be the most important day of the week with the employment data being posted since Wednesday’s FOMC meeting likely won’t yield any surprises. The employment data can easily erase the week's accumulated gains or losses in mortgage rates if it shows noticeable variances from forecasts. We may actually see a sizeable change in rates Wednesday also if the ISM index shows favorable or unfavorable results, but I am predicting Friday to be the most active. 

Mortgage Market Update

This week has five pieces of economic data for the markets to digest in addition to two potentially relevant Treasury auctions. The week’s data starts late tomorrow morning with the release of March's Existing Homes Sales numbers from the National Association of Realtors at 10:00 AM ET. This report gives us an indication of housing sector strength and mortgage credit demand. It is considered to be moderately important to the markets, but can influence mortgage pricing if it shows a sizable variance from forecasts. Ideally, the bond market would like to see a drop in home resales because a soft housing sector makes a broader economic recovery difficult. Analysts are expecting to see a small increase in sales between February and March. The larger the increase, the worse the news it is for bonds and mortgage rates.

The sister report to tomorrow’s housing data is March's New Home Sales. It will be released late Tuesday morning, but tracks a much smaller portion of all home sales as Monday’s report does. It also gives us an indication of housing sector strength and future mortgage credit demand, however, it is the week's least important report. Unless it varies greatly from analysts' forecasts, I am not expecting the data to cause much movement in mortgage rates. Analysts are currently forecasting an increase in sales of newly constructed homes.

Wednesday morning's data is March's Durable Goods Orders that will be released at 8:30 AM ET. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products that are expected to last three or more years, such as appliances and electronics. Current forecasts are calling for a decline in new orders of 3.1%. This would be a sign of manufacturing sector contraction, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A much larger decline would be considered good news for bonds and mortgage pricing, while a large increase would indicate manufacturing sector strength. A sign of solid manufacturing growth could lead to higher mortgage rates Wednesday.

In addition to this week's economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours.

Friday has the two remaining reports, one of which is highly important to the financial and mortgage markets. That would be the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measure of economic growth or contraction. I expect this report to cause sizable movement in the financial markets Friday and therefore the mortgage market also. Analysts are expecting it to show that the economy grew at an annual rate of 2.9%, which would be a much quicker pace than the final quarter of last year. A smaller increase would be considered good news for mortgage rates. But, a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates Friday morning.

The last piece of a data is the University of Michigan's update to their Index of Consumer Sentiment for April. This report gives us an indication of consumer sentiment. I don't expect it to have a significant impact on bonds and mortgage pricing unless it varies greatly from forecasts, especially since it comes after the GDP reading. Current forecasts are calling for little change from the preliminary reading of 72.3. This means that surveyed consumers were just as optimistic about their own financial situations as they were earlier this month. This data is relevant because rising sentiment means consumers are more apt to make a large purchase in the near future, fueling economic growth.

Overall, look for a fair amount of movement in the financial markets and mortgage rates this week. Friday is the most important day due to the GDP, but we should see movement in rates several days, particularly days that stocks are active. Tuesday appears to be the best candidate for the quietest day for mortgage rates. If this week's reports reveal weaker than expected economic conditions, the bond market could extend its recent rally and mortgage rates should fall for the week.

Mortgage Market Update

Monday’s bond market has opened up slightly following early stock losses. The major stock indexes are retreating away from last week’s record levels with the Dow down 87 points and the Nasdaq down 21 points. The bond market is currently up 2/32, which will likely keep this morning’s mortgage rates close to Friday’s levels or possibly slightly lower.

There is nothing of importance scheduled for release today, so any changes to mortgage rates intra-day will probably come from stock movement. The rest of the week brings us the release of five economic reports that have the potential to affect mortgage rates. In addition, we have a bunch of corporate earnings releases that can significantly impact the stock markets and help direct funds into or away from mortgage-related bonds.

Tomorrow has three of the week’s five reports, beginning with March's Consumer Price Index (CPI) at 8:30 AM ET tomorrow. This index is one of the most important pieces of data we see each month. It is similar to last week's PPI but measures inflationary pressures at the consumer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors, leading to bond selling and higher mortgage rates. There are two readings in the index that traders watch- the overall and the core data that excludes more volatile food and energy prices. Analysts are expecting to see a 0.1%decline in the overall readings and a 0.2% rise in the core reading. The core data is the more important reading, which ideally will show a decline in prices at the consumer level.

March's Housing Starts is the next report, also coming early tomorrow morning. It gives us a measurement of housing sector strength and mortgage credit demand by tracking starts of new home construction and the number of permits issued for future starts. This data usually doesn't cause much movement in mortgage pricing unless it varies greatly from forecasts. It is expected to show a small increase in construction starts of new homes. Good news for the bond market and mortgage rates would be a decline in home starts, indicating housing sector weakness.

The third report of the day is March’s Industrial Production data that will be posted at 9:15 AM ET. It tracks output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Current forecasts are calling for an increase in production of 0.3%. This data is considered to be only moderately important to rates, so it will take more than just a slight variance to influence bond trading and mortgage pricing. Signs of manufacturing sector strength are considered negative news for mortgage rates, so a decline in output would be good news for the bond market and mortgage shoppers.

Overall, it will likely be a moderately active week for mortgage rates. However, unlike many weeks, the most important news comes earlier in the week. I am labeling tomorrow as the most important due to the data that is scheduled and Friday appears to be the best candidate for the least active day. The stock markets could also heavily influence bond trading and mortgage pricing any day this week as we get more corporate earnings releases. I don’t think this will be one of the more active weeks in terms of mortgage rate movement, although we should see minor changes a couple days.

Mortgage Market Update

Monday’s bond market has opened flat as investors take a breather after Friday’s volatility. The stock markets are showing relatively minor losses with the Dow down 36 points and the Nasdaq down 4 points. The bond market is currently unchanged from Friday’s close, but that is a little higher than Friday’s morning level when mortgage rates were posted. Bonds weakened a little during afternoon trading, leading to some lenders to make upward revisions to their rate sheets late Friday.

There is nothing of relevance to mortgage rates scheduled for today. The rest of the week brings us the release of three relevant economic reports, in addition to a couple of Treasury auctions and the minutes from the last FOMC meeting. Corporate earnings season also kicks off today with Alcoa posting this afternoon. That report is usually a focal point because it is the first Dow component to report earnings each quarter. There are other companies scheduled to post this week that will also influence the markets and broader economic theories, but AA is the first of the key earnings. Generally speaking, weaker than expected reports hurt stock prices and make bonds more attractive to investors.

Tomorrow also has nothing of importance scheduled for release. The first events of the week will come Wednesday afternoon when we get the release of the minutes from the last FOMC meeting and have one of the Treasury auctions worth watching. Market participants will be looking at the minutes closely as they give us insight to the Fed's current thought process and individual Fed member opinions. The 10-year Treasury Note auction helps gauge investor demand for longer-term securities, including mortgage-related bonds.

Overall, look for the most movement in rates the latter part of the week, particularly Friday with all three of this week’s economic reports coming that day. The PPI and Retail Sales reports are considered highly important monthly reports, both of which will be released early Friday. Also look for the stock markets to influence bond trading and mortgage rates a good part of the week as traders react to the earnings news, but I believe we will see the most movement in rates the latter part.

Mortgage Market Update

Monday’s bond market has opened fairly flat following the three plus day holiday weekend. This morning’s economic data was good news for the bond market but weaker than expected reports that were posted Friday when the markets were closed are limiting this morning’s improvements. The stock markets are also having an uneventful morning with the Dow up 6 points and the Nasdaq down 11 points. The bond market is currently up 1/32, which may lead to a very slight improvement to mortgage rates if comparing to Thursday’s pricing.

The Institute for Supply Management (ISM) gave us today’s only relevant economic data with the release of their manufacturing index for March. They announced a reading of 51.3 late this morning that was noticeably lower than forecasts of 54.0 and February’s 54.2. This indicates that fewer surveyed manufacturers felt business improved during the month than did in February, hinting at manufacturing sector weakness. The reading remained above the benchmark growth indicator of 50.0, but is very close to falling below that level. Therefore, we should consider this data favorable for the bond market and mortgage rates.

Tomorrow’s only relevant data is February's Factory Orders at 10:00 AM ET. This Commerce Department report is similar to last week's Durable Goods Orders report, except it includes orders for both durable and non-durable goods. It will give us another measurement of manufacturing sector strength, but is one of the week’s less important reports. Unless it varies greatly from forecasts of a 2.5% increase, I suspect that it will be a non-factor in the mortgage market tomorrow.

Overall, Friday is the biggest day of the week due to the significance of the monthly Employment report and its impact on most of the financial markets and mortgage rates. The middle part of the week should be relatively calm unless something unexpected happens overseas or in the stock movements. 

Mortgage Market Update

This week brings us the release of six pieces of relevant economic data along with two Treasury auctions that have the potential to affect mortgage rates. This is also a holiday-shortened week with the bond market scheduled to close early Thursday and remain closed Friday in observance of the Good Friday holiday. The stock markets will be closed Friday only. 

Monday's only event is a speaking engagement by Fed Chairman Bernanke early afternoon. He will be speaking at the London School of Economics at 1:15 PM ET tomorrow. The topic of his speech is what was learned from the past financial crisis. I am not expecting this to be a market moving appearance, but anytime he does speak, the markets listen. Therefore, we will be watching for any reaction to his words.

There are three pieces of data set for release Tuesday. The first will come from the Commerce Department at 8:30 AM ET, who will post February's Durable Goods Orders. This report gives us a measurement of manufacturing sector strength by tracking new orders for big-ticket items, or products that are expected to last three or more years such as electronics, appliances and airplanes. This data is known to be volatile from month to month but is still considered to be of fairly high importance to the markets. Analysts are expecting it to show an increase in new orders of approximately 3.8%. A much larger increase would be considered negative for bonds as it would indicate economic strength and could lead to higher mortgage rates Tuesday morning.

March's Consumer Confidence Index (CCI) will be posted at 10:00 AM ET Tuesday morning. This index gives us an indication of consumers' willingness to spend. Bond traders watch this data closely because consumer spending makes up over two-thirds of our economy. If this report shows that confidence in their own financial situations is falling, it would indicate that consumers are less apt to make a large purchase in the near future. If it reveals that confidence looks to be growing, we may see bond traders sell as economic growth may rise, pushing mortgage rates higher Tuesday morning. It is expected to show a decline from February's 69.0 reading to 66.9 for March. The lower the reading, the better the news it is for bonds and mortgage rates.

The Commerce Department will also give us February's New Home Sales figures late Tuesday morning. They are expected to announce a small decline in sales of newly constructed homes. This report tracks a much smaller percentage of home sales than last week’s Existing Home Sales report covered, so it should have a much weaker influence on the markets and mortgage pricing. A large increase in sales would be negative for the bond market and mortgage pricing because it would point towards economic strength.

The next relevant data is Thursday's final revision to the 4th Quarter GDP. This is the second and final revision to January's preliminary reading of the U.S. Gross Domestic Product, or the sum of all goods and services produced in the U.S. It is expected to show that the economy grew at an annual pace of 0.3% last quarter, up slightly from the previous estimate of 0.1% that was released last month. Analysts are now more concerned with next month's preliminary reading of the 1st quarter than data from three to six months ago, so I don't expect this report to affect mortgage rates much.

Friday has two reports that could affect mortgage rates, but since the financial and mortgage markets will be closed we will have to wait for next Monday to see them react to these reports. The first is February's Personal Income & Outlays report early Friday morning. This data helps us measure consumers' ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending- related information has on the financial markets. If a consumer's income is rising, they are more likely to make additional purchases in the near future. This raises inflation concerns, adds fuel for economic growth and has a negative effect on the bond market and mortgage rates. Current forecasts are calling for a 0.8% increase in income and a 0.6% rise in spending. Smaller than expected increases would be ideal for bond traders and mortgage shoppers. 

The final report of the week comes from the University of Michigan just before 10:00 AM ET Friday. Their revision to their March Consumer Sentiment Index will give us another indication of consumer confidence, which hints at consumers' willingness to spend. As with Tuesday's CCI report, rising confidence is considered bad news for the bond market and mortgage pricing. Friday’s report is expected to show a small increase from the preliminary reading of 71.8. Favorable results for bonds and mortgage rates would be a decline in confidence.

In addition to this week's economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.

Overall, I believe Tuesday will be the most active day for mortgage rates with three reports scheduled, including the week’s most important (Durable Goods). I would not be surprised to see pressure in bonds Monday due to progress in Cyprus this weekend, so be prepared to see movement in rates today also. There doesn’t appear to be too much to be concerned with, however, any day could bring something unexpected that leads to a big move in the markets and mortgage pricing. 

Mortgage Market Update

Monday’s bond market has opened in positive territory in reaction to the overseas news about Cyprus from this weekend. As expected, stocks are reacting negatively to the same news, pushing the Dow down 41 points and the Nasdaq down 17 points. Both indexes are well off earlier lows, but are still in negative ground. The bond market is currently up 14/32, pushing the yield on the benchmark 10-year Treasury Note back below 2.00% during early trading. That should create an improvement in this morning’s mortgage rates from Friday’s morning pricing.

There is no economic data being released today that is of relevance to the bond or mortgage markets. The rest of the week brings us the release of four monthly reports for the bond market to digest, but none of them are considered to be highly important. We also have some key Fed FOMC events the middle part of the week.

The economic news begins early tomorrow morning when February's Housing Starts will be posted. This report tracks construction starts of new housing. It doesn't usually cause much movement in mortgage rates and is considered one of the less important reports we see each month. It is expected to show an increase in housing starts, indicating growth in the housing sector. Good news for the bond market and mortgage rates would be a sizable decline in new starts, but unless we see a large variance from forecasts the data likely will not lead to a noticeable move in mortgage pricing.

Overall, I am considering Wednesday as the key day of the week with three Fed events scheduled (FOMC adjournment, Fed economic predictions and Chairman Bernanke’s press conference). The least important day will probably be Friday, however, we could see movement in rates any day. It appears that the recent stock rally could be losing steam and if that is true we may see funds shift back into bonds in the near future that could lead to lower mortgage rates.

Mortgage Market Update

Monday’s bond market has opened flat with little to drive trading this morning. The stock markets are showing minor losses of 15 points in the Dow and 5 points in the Nasdaq. Those are nothing to be excited or concerned about. The bond market is currently unchanged from Friday’s close, but we will still likely see an increase in this morning’s mortgage rates of approximately .125 of a discount point due to weakness Friday afternoon. 

There is nothing of relevance scheduled for release today, but the rest of the week brings us the release of five relevant economic reports along with two Treasury auctions that could influence mortgage rates. A couple of the economic reports are considered highly important, so we could see a fair amount of movement in rates again this week. All of the data is scheduled for release over the last three days, therefore, we should see the most movement in rates the latter part of the week.

The first thing on the calendar will come from the Commerce Department early Wednesday morning when they post February's Retail Sales data. This data is extremely important to the financial markets because it measures consumer spending. Since consumer spending makes up over two-thirds of the U.S. economy, data that is related usually has a big impact on the markets. This month's report is expected to show an increase in sales of approximately 0.5%. If it reveals a larger than expected increase, the bond market will likely fall and mortgage rates will move higher as it would indicate a stronger level of economic growth than many had thought. If it reveals a much smaller than expected increase, I expect to see bond prices rise and mortgage rates improve Wednesday morning.

Overall, I would label Friday as the most important day of the week, but Wednesday is also likely to be active for mortgage rates. Stocks rallied last week, helping to drive bond yields and mortgage rates higher. The yield on the benchmark 10-year Treasury Note is still above 2.00%. This is troublesome for mortgage rates if it remains above that threshold as it could become a floor of support. Since mortgage rates follow bond yields, it would mean rates are more likely to rise than move much lower in the immediate future. 

Mortgage Market Update

Monday’s bond market has opened down slightly even though the major stock indexes are showing early losses. The Dow is currently down 55 points while the Nasdaq has lost 8 points. The bond market is currently down 3/32, which may push this morning’s mortgage rates slightly higher than Friday’s morning pricing. 

There is nothing of importance scheduled for release today that is likely to influence mortgage rates. The rest of the week has five economic reports for the markets to digest, but one is considered to be highly important. The remaining reports are moderately important to the markets, meaning they have the potential to affect mortgage rates but usually don't cause a noticeable change. The most important data comes late in the week, but sizable moves in stocks can impact bond trading and mortgage rates any day.

The week's first data comes Wednesday with the release of January's Factory Orders report during late morning hours and the Fed Beige Book during afternoon trading. The Factory Orders report will give us a measurement of manufacturing sector strength while the Beige Book details economic activity throughout the country by Federal Reserve region. There are also some private sector employment-related reports due to be posted Wednesday morning that could affect bond trading enough to move mortgage rates if they show significant surprises.

Overall, look for a fairly active week in the markets and mortgage rates, especially the middle and latter days. I suspect there will be some optimism leading up to Friday's Employment report, which could lead to support in stocks and pressure in bonds as we get closer to Friday. That day is undoubtedly the biggest of the week, but Wednesday’s events and some central bank news from overseas early Thursday morning could also heavily influence mortgage rates.

Mortgage Market Update

Monday’s bond market initially opened in negative territory but has since rebounded into positive ground. The opposite can be said for stocks as they first looked to be moving higher today but are now mixed with the Dow down 10 points and the Nasdaq up 6 points. The bond market is currently up 3/32, which should improve this morning’s mortgage rates by approximately .125 of a discount point from Friday’s morning levels. We did see some strength late Friday, however, I don’t believe it was enough of a move for many lenders to improve rates that late in the week. They most likely opted for this morning’s open to reflect that improvement.

There is nothing of relevance to mortgage rates in terms of economic releases scheduled for release today. The markets are watching the Italian elections and exit polls are being attributed to the rebound in bond prices this morning. Today is the only day of the week that we don’t have something scheduled here that is expected to influence mortgage rates. The rest of the week brings us the release of seven economic reports to be concerned with in addition to some very important testimony from Fed Chairman Bernanke and two potentially relevant Treasury auctions. One of the reports is considered to be very important, but nearly all of the week's releases have the potential to affect mortgage rates.

The first piece of data is January's New Home Sales report at 10:00 AM ET tomorrow. This is the least important report of the week, and is the sister report to last week's Existing Home Sales data. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates unless they show significant surprises. This report is expected to show an increase in sales, hinting at strength in the new home portion of the housing sector. Ideally, the bond market would prefer to see housing sector weakness because it makes a broader economic recovery more difficult.

Tomorrow also has February's Consumer Confidence Index (CCI) being posted during late morning trading. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. If consumers are feeling good about their own financial situations, they are more apt to make large purchases in the near future. Since consumer spending makes up over two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show an increase in confidence from 58.6 in January to 62.0 this month. A lower reading would be considered good news for bonds and mortgage rates since it would indicate consumers are less likely to make a large purchase in the near future.

The biggest news of the day tomorrow will be Fed Chairman Bernanke’s semi-annual testimony on the status of the economy at 10:00 AM ET. He will be speaking to the Senate Banking Committee tomorrow morning and the House Financial Services Committee Wednesday. Market participants will watch his words very closely. He is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what he says during this testimony. Look for him to address the unemployment and housing sectors along with our budget stalemate and their impact on the overall economy. His testimony begins with a prepared statement then is followed by Q & A with committee members. I am expecting to see the markets fluctuate greatly tomorrow morning, possibly affecting mortgage rates also. The first day of testimony almost always causes the most volatility because the prepared statement made by the Chairman on the second day usually differs little from that of the first day.

In addition to the economic data and Fed testimony, tomorrow also has the first of two Treasury auctions that can potentially affect bond trading and mortgage pricing. 5-year Notes will be sold tomorrow and 7-year Notes go to auction Wednesday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates.

Overall, I am expecting tomorrow to be the most important day of the week for mortgage rates. Some of Friday’s data is considered highly important, so we may see a fair amount of movement in the markets and mortgage pricing that day also. We will also be watching progress on the automatic budget cuts that are scheduled to take effect Friday (March 1st) and the major stock indexes (Dow at 14,000) for direction of mortgage rates. There is little doubt that this will be an extremely active week in the markets and likely mortgage rates too.

Mortgage Market Update

This week brings us the release of five pieces of economic data for the bond market to digest along with the minutes from the most recent FOMC meeting. Making things a little more interesting is the fact that all of the week’s events take place over only two days. The financial markets will be closed today in observance of the President's Day holiday.

There is nothing of relevance scheduled to be posted Tuesday. The Labor Department will release their Producer Price Index (PPI) for January early Wednesday morning. It measures inflationary pressures at the producer level of the economy and is considered to be one of the key measures of inflation we see each month. There are two portions of the report that analysts watch- the overall reading and the core data reading. The core data is more important to market participants because it excludes more volatile food and energy prices. It is expected to show an increase of 0.3% in the overall reading and a 0.1% rise in the core data. Good news for bonds would be a decline in both readings, particularly the core data as it would ease concerns about future inflation that make long-term securities less attractive to investors.

January's Housing Starts will also be posted early Wednesday morning, giving us an indication of housing sector strength and mortgage credit demand by tracking new housing construction starts. It usually does not affect rates unless the results vary greatly from forecasts. Current forecasts are calling for a fairly sizable decline in starts of new housing. That would be favorable news for the bond market and mortgage rates because it would point towards economic weakness. A weak housing sector makes a broader economic recovery less likely in the near future.

Wednesday also brings us the release of the FOMC minutes. Traders will be looking for any indication of the Fed's next move regarding monetary policy, particularly any discussion about modifying the Fed’s current bond buying programs. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading. These minutes may lead to afternoon volatility Wednesday, or they may be a non-factor. However, they do carry the potential to influence mortgage rates so they should be watched.

The sister report to the PPI will be posted early Thursday morning when January's Consumer Price Index (CPI) is released. The difference between the two is that the CPI measures inflationary pressures at the more important consumer level of the economy. With exception to maybe the Employment report, the CPI is the single most important report that we see each month. Its results can have a huge impact on the financial markets, especially on long-term securities such as mortgage-related bonds. It is expected to show a 0.1% increase in the overall index and a 0.2% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall Thursday.

January's Existing Home Sales report will be released by the National Association of Realtors late Thursday morning. It tracks home resales throughout the country, giving us a measurement of housing sector strength. It is expected to show a slight decline in sales of existing homes, meaning the housing sector remained fairly flat during the month. Ideally, the bond market would like to see a sizable decline in sales because weak housing is one of the hurdles that the economy must overcome to fully recover from the past recession. The longer it takes for the housing market to gain momentum, the longer it will take the broader economy to do the same.

Also late Thursday morning will be the release of the Leading Economic Indicators (LEI) for January. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.3% increase, meaning that economic activity may rise in the near future. A smaller than expected increase would be good news for the bond market and mortgage rates, but the CPI draws much more attention than the LEI. Therefore, for this report to influence mortgage pricing, it will have to show a sizable variance from forecasts and the CPI will have to match estimates.

Overall, I am expecting Thursday to be the most active day for mortgage rates, but Wednesday’s releases are also enough to cause noticeable movement. The least important day is probably Friday as we could see changes to rates Tuesday morning after the long weekend. I am still closely tracking the Dow since it has been unable to break above 14,000 and remain there. The 10-year Treasury Note is still above 2.00%. If it falls below this level and the Dow remains below 14,000, we could be in for a nice rally in mortgage pricing.

Mortgage Market Update

This week brings us the release of only three pieces of monthly economic data that is relevant to mortgage rates in addition to two Treasury auctions. One of the economic reports is considered highly important to the markets, but the others are not likely to be market movers. We still could see a fair amount of movement in mortgage rates though, especially if stocks make a sizable move upward or downward.

Nothing of concern is due Monday or Tuesday morning, leaving bond trading to be driven by the stock markets the first part of the week. If the major stock indexes move higher, we will probably see funds move away from bonds and into stocks. This would lead to higher mortgage rates as bond prices and yields move in opposite directions. Mortgage rates tend to follow bond yields, so we prefer to see bond prices go up, pushing rates lower.

The week's first release is one of the more important ones we get each month. The Commerce Department will post January's Retail Sales data early Wednesday morning. This report is very important to the financial markets because it measures consumer spending. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched quite closely. If Wednesday's report reveals weaker than expected retail-level sales, the bond market should thrive and mortgage rates will fall since it would be a sign that the economy is not as strong as many had thought. However, a stronger reading than the 0.1% increase that is expected could lead to higher mortgage rates Wednesday.

January's Industrial Production data will be released mid-morning Friday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities and can have a moderate impact on the financial markets. Analysts are expecting to see a 0.2% increase in production from December to January. A decline in output would be good news and should push bond prices higher, lowering mortgage rates Friday. 

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 also 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 73.5, down slightly from January's final reading of 73.8. That would indicate consumers were a little less optimistic about their own financial situations than last month and are less likely to make large a purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, this would be considered slightly favorable news for bonds and mortgage pricing.

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 of the two as it will give us an 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 likely result in upward afternoon revisions to mortgage rates.

Overall, I believe we will see the most movement in rates the middle part of the week. The Dow closed just under 14,000 Friday, so we will also be watching it for an indication of bond movement. I believe that failure to break above that level could mean a downward leg in stocks that would boost bond prices and improve mortgage rates. I see Wednesday as the likely candidate for the most important day and Tuesday being the least active, assuming stocks remain calm most of the week.

Mortgage Market Update

Monday’s bond market has opened in positive territory as stocks kick the week off in negative ground. The Dow is currently down 96 point while the Nasdaq has lost 15 points. The bond market is currently up 12/32, but due to fairly significant weakness late Friday, we may not see much of an improvement in this morning’s mortgage rates if comparing to Friday’s morning pricing. 

The Commerce Department gave us today’s only relevant economic data with the release of December's Factory Orders data late this morning. They announced that new orders for durable and non-durable goods rose 1.8% in December when analysts were expecting to see a 2.4% increase. That means the manufacturing sector did strengthen at the end of the year, but at a slower pace than many had thought. Therefore, we can consider the data fairly good news for the bond market and mortgage pricing.

Tomorrow has nothing of relevance scheduled for release. The rest of the week has only two more pieces of monthly economic data scheduled and neither of them is considered to be highly important to mortgage rates. While that would normally not be something to look forward to, it should be welcomed news following the beating mortgage rates have taken over the past couple weeks, especially if the major stock indexes continue to lose ground.

Overall, I am expecting a much calmer week in the mortgage market than we have seen the past couple. With little economic data to drive bond trading, look for the stock markets to play a major role in bond movement and mortgage rate changes. If the major stock indexes extend their recent rally that closed the Dow above 14,000 Friday for the first time since Oct 2007 (but has been lost this morning), we could see bond prices fall and their yields move further above 2.00%. Since mortgage rates tend to follow bond yields, this would be bad news for mortgage shoppers. However, if stocks extend this morning’s selling, we should see bond prices continue to rise and mortgage rates move lower this week.

Mortgage Market Update

Monday’s bond market has opened in negative territory again, extending Friday’s sell-off. The stock markets are mixed with the Dow down 16 points and the Nasdaq up 5 points. The bond market is currently down 11/32, pushing the yield on the benchmark 10-year Treasury Note to 1.99%. This will cause another increase in mortgage rates, raising the increase since Friday’s morning pricing.

December's Durable Goods Orders report was posted by the Commerce Department at 8:30 AM this morning. It showed a much larger than expected increase in new orders for big-ticket products with a 4.6% jump that was nearly triple forecasts. Even the secondary reading that excludes more volatile transportation-related orders such as new airplanes showed a 1.3% increase when it was expected to remain flat from November’s orders. This indicates a stronger and growing manufacturing sector, making the data negative for the bond market and mortgage rates.

The rest of the week is packed with economic reports and other events that are relevant to bond trading and mortgage rates. There are seven more pieces of monthly or quarterly economic data scheduled with at least one being posted each day. In addition to those reports, there is also a two-day FOMC meeting and a couple of Treasury auctions that have the potential to affect bond trading enough to slightly move rates.

Tomorrow’s only relevant economic data is January's Consumer Confidence Index (CCI) at 10:00 AM ET. This report is considered to be of moderate to high importance to the bond market and therefore can move mortgage rates if it shows any surprises. It is an indicator of consumer sentiment, which is important because waning confidence in their own financial situations usually means that consumers are less willing to make large purchases in the near future. Because consumer spending makes up over two-thirds of the U.S. economy, market participants are very attentive to related data. Analysts are expecting to see little change from December's reading, indicating consumer confidence was flat. A reading much smaller than the expected 65.1 would be ideal for the bond market and mortgage rates. A higher reading than forecasts would hint that consumers are more likely to spend in the immediate future, fueling economic growth and possibly pushing mortgage pricing higher tomorrow.

Also, the Fed will auction 5-year Treasury Notes tomorrow, followed by 7-year Notes on Wednesday. If the sale was met with a strong demand from investors, the broader bond market may improve during afternoon hours tomorrow. If it drew a lackluster interest, we could see more bond selling and higher mortgage rates after the results are posted at 1:00 PM ET tomorrow.

Overall, this is a highly active week that will likely bring plenty of volatility to the markets and mortgage rates. It is difficult to say exactly which day will probably have the most movement in mortgage rates, but Wednesday and Friday are certainly the best candidates. Wednesday has the GDP and FOMC meeting while Friday’s agenda includes two highly important releases in the Employment and ISM reports. The remaining days are all equally important for mortgage rates.

Mortgage Market Update

This week brings us the release of only three pieces of monthly economic data for the markets to digest, but none of them are 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 week’s first relevant economic report comes late Tuesday morning when the National Association of Realtors posts December's Existing Home Sales. This data will give us a measurement of housing sector strength and mortgage demand by tracking home resales. It is expected to show an increase in sales of approximately 1.0%, meaning the housing sector strengthened a little last month. That would be considered negative news for the bond market and mortgage rates because a strengthening housing sector makes a broader economic recovery more likely. However, as long we don’t see a significant surprise in its results, it shouldn’t have a noticeable impact on Tuesday’s mortgage rates.

December’s Leading Economic Indicators (LEI) is the next report scheduled for release. It will be posted at 10:00 AM ET Thursday morning by the Conference Board, who is a New York-based business research group. It attempts to predict economic activity over the next several months, but since it is compiled and posted by a non-governmental agency, it is not considered to be of high importance to the financial and mortgage markets. Thursday’s release is expected to show a 0.5% increase, meaning the indicators are predicting a moderate increase in economic activity this spring. Theoretically, that would be bad news for mortgage rates because long-term securities such as mortgage-related bonds tend to do better in weaker economic conditions. However, as long as we don’t see a much stronger than predicted increase, I don’t think this data will have much of an influence on mortgage pricing.

The third and final relevant report of the week is December's New Home Sales report late Friday morning. It is considered to be the sister release to last week's Existing Home Sales, giving us a small snapshot of housing sector strength. It tracks a much smaller portion of home sales than last week's report did and is forecasted to show an increase in sales of newly constructed homes. However, this data is not important enough to heavily influence mortgage pricing unless it varies greatly from forecasts.

Overall, it appears that we may have a fairly quiet week ahead of us in the mortgage market. That is unless we see something drastic happen in stocks. The major stock indexes closed last week at their highest levels in 5 years, which leads me to believe they may be ready for another pullback. We have some major corporate earnings news this week from companies such as Apple, IBM and Google to name a few that could heavily sway stock trading. Weaker than expected earnings and/or outlooks in some of the key earnings reports should cause stocks to drop and investor funds to move into bonds, leading to lower mortgage rates. On the other hand, good news in those earnings releases could extend the recent stock rally, drawing funds away from bonds. The latter would likely cause mortgage rates to move higher this week. I am holding the short and mid-term lock recommendations for the time being, but am prepared to shift to a less conservative position if the major stocks indexes start to move lower.