Leading Economic Indicators (LEI)

Weekly Economic Releases for Mar. 15th

This week brings us the release of five relevant economic reports along with an FOMC meeting for the markets to digest. The first piece of data will come mid-morning tomorrow when February’s Industrial Production report is posted. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 1.2% drop in output. A larger decline would be considered favorable news for bonds and mortgage rates.

The Labor Department will post February’s Producer Price Index (PPI) early Tuesday morning. This index measures inflationary pressures at the producer level of the economy. There are two portions of the index – the overall reading and the core data. The core data is more important and watched more closely because it excludes more volatile food and energy prices. If the index shows a large increase, inflation concerns may rise, making long-term investments such as mortgage-related bonds less attractiv e to investors. This would lead to higher mortgage rates Tuesday morning. Current forecasts are calling for a 0.4% rise in the overall reading and a 0.1% increase in the core data.

Also Tuesday is February’s Housing Starts, but it will likely not have much of an impact on mortgage rates. It gives us a measurement of housing sector strength and future mortgage credit demand, but is usually considered to be of low importance to the financial markets. It is expected to show a decline in new starts from January to February.

February’s Consumer Price Index (CPI) will be released Wednesday, which measures inflationary pressures at the very important consumer level of the economy. Its results can definitely have a huge impact on the financial markets, especially long-term securities such as mortgage-related bonds. It is expected to show a 0.3% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall Wednesday.

The FOMC meeting that begins Tuesday and will adjourn Wednesday at 2:00 PM ET. With key short-term interest rates practically at 0% already, there is not much the Fed can do with monetary policy at this meeting. They have previously stated that they expect rates to remain near zero for some time. Therefore, the anxiety of the post-meeting statement should be minimal and the likelihood of a major market reaction to the statement is reduced significantly. If the statement references a time frame of an economic recovery, we may see the markets react if it reveals any surprises. Other than that, I am not expecting too much movement in mortgage rates Wednesday afternoon.

The Conference Board will post its Leading Economic Indicators (LEI) for February late Thursday morning. This index attempts to measure economic activity over the next three to six months. Current forecasts are calling for a 0.6% decline, indicating that economic activity will likely slow in the coming weeks. This would be good news for the bond market and mortgage rates.

Overall, look for Wednesday to be the most important day of the week due to the CPI release. Tuesday may also be an active day for rates with the PPI on tap. But the wildcard is whether stocks continue last week’s gains or if they move lower again. Stock strength would likely draw funds from bonds and lead to higher mortgage rates. However, if the major indexes fall again, funds may shift into bonds, leading to lower mortgage rates.

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.

Leading Economic Indicators (LEI)

Weekly Economic Releases for Feb. 15th

There are five economic reports worth watching this week that are likely to affect mortgage rates in addition to the minutes from the last FOMC meeting. The financial markets are closed tomorrow in observance of the President’s Day Holiday and will reopen Tuesday morning. You may find some lenders to be open for business tomorrow, but I would not expect to see new rates issued until Tuesday.

Wednesday brings us three releases, including the week’s least important of the five economic reports. January’s Housing Starts will be posted early Wednesday morning, giving us an indication of housing sector strength and mortgage credit demand. It usually does not affect rates unless it varies greatly from forecasts. Current forecasts are calling for a decline in starts of new housing.

January’s Industrial Production data will be released mid-morning Wednesday. It gives us a measurement of manufacturing sector strength by tracking ou tput at U.S. factories. Mines and utilities and can have a moderate impact on the financial markets. Analysts are expecting to see 1.4% decline in production from December to January. A larger than expected decline in output would be good news and should push bond prices higher, lowering mortgage rates Wednesday.

The minutes from last FOMC meeting will be released Wednesday afternoon. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading. However, with little likelihood of the Fed making a change to key short-term rates anytime soon, these minutes will likely not heavily influence trading or lead to a change in mortgage rates Wednesday afternoon.

The Labor Department will post their Producer Price Index (PPI) for January early Thursday morning. It measures inflationary pressures at the producer level of the economy. 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 small increases in both readings, indicating that inflation is not a threat. Good news for bonds would be a decline in both readings, particularly the core data.

Also 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 no change, meaning that economic activity may be flat in the near future. A decline would be good news for the bond market and mortgage rates.

The Labor Department will release January’s Consumer Price Index (CPI) at 8:30 AM ET Friday, which measures inflationary pressures at the very important consumer le vel of the economy. With exception to maybe the Employment report, the CPI is the most important report that we see each month. Its results can have a huge impact on the financial markets, especially long-term securities such as mortgage-related bonds. It is expected to show a 0.3% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall.

Overall, the most important day of the week will likely be Friday with the CPI being released, but Wednesday and Thursday may also be active days for mortgage rates. Tuesday’s opening will also be interesting with it being the first trading day since the approval of the President’s economic stimulus package. In other words, be prepared for an active week in the markets and mortgage rates.

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.

Leading Economic Indicators (LEI)

Weekly Economic Releases for Jan. 25th

This week is extremely busy in terms of economic data scheduled for release and will likely be another active week for mortgage rates. The number of releases is actually irrelevant due to the importance of the some of the reports. There are eight economic releases scheduled for the week in addition to the first Federal Open Market Committee (FOMC) meeting of the year. All but two of the releases scheduled are considered to be of moderate or high importance, meaning we should see quite a bit of movement in mortgage rates again this week.

The first report of the week is tomorrow’s release of December’s Existing Home Sales. It gives us a measurement of housing sector strength by tracking sales of newly constructed homes. It is one of the week’s least important reports, therefore, it will likely not have a significant impact on bond trading or mortgage rates. Current forecasts are calling for a small decline in sales.

December’s Leading Economic Indicators (LEI) will also be posted late tomorrow morning. This index attempts to measure economic activity over the next three to six months. It is considered to be of moderate importance to the bond and mortgage markets. Analysts are currently expecting to see a 0.3% decline, meaning that economic growth over the next few months will likely slow. A larger than expected drop would be good news for the bond market and mortgage rates, but an unexpected rise could lead to bond selling and an increase to mortgage rates tomorrow morning.

January’s Consumer Confidence Index (CCI) will be released Tuesday morning. This report is considered to be of high-importance to the bond market and therefore can move mortgage rates. It is an indicator of consumer sentiment, which is important because a decline would be construed as a sign that consumers may be less willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, market participants are very attentive to related data. A reading smaller than the expected 38.0 would be ideal for the bond market and mortgage rates.

There is no factual economic data scheduled for release Wednesday, but we will get the results of this year’s first FOMC meeting. It will begin Tuesday and adjourn at 2:15 PM ET Wednesday. It is expected to yield no change to short-term interest rate, but as is often the case, traders will be looking for any indication of the Fed’s next move. However, I am not expecting this meeting to have a major impact on the markets or mortgage rates because the Fed can’t lower key rates much more. There is little chance of indicating a possible rate hike in the near future, so I don’t believe that this meeting will have the influence they usually do.

Thursday morning brings us the release of December’s Durable Goods Orders. This data helps us measure manufacturing strength by tracking new orders at U.S. factories for products that are expected to last three or more years. The data often is quite volatile from month to month, but is currently expected to show a decline in orders of 1.8%. A larger than expected drop would be good news for bonds and mortgage rates.

December’s New Home Sales report, the sister release to Monday’s Existing Home Sales, will be posted late Thursday morning. It is expected to show another decline in sales of new homes, but is not important enough to heavily influence mortgage pricing.

Next up is Friday, which has three reports scheduled for release. The first of them is one of the most important reports that we see regularly. The initial reading of the 4th Quarter Gross Domestic Product (GDP) will be posted early Friday morning. This data is so important because it is considered to be the best measure of economic growth. The GDP itself is the total sum of all goods and services produced in the United States. Its’ results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. There are three readings to each quarter’s activity, each released approximately one month apart. The first, which usually carries the most volatility, is expected to be a decrease of 5.2%. A weaker reading would be great news for the bond market, but the 5.2% decline would be the biggest quarterly drop in 26 years.

The 4th Quarter Employment Cost Index (ECI) is also scheduled for release early Friday morning. It measures employer costs for employee wages and benefits, giving us an indication of the threat of wage inflation. It usually has more of an effect on the bond market than the stock markets. Current forecasts are showing an increase of 0.7%. A lower than expected reading would be favorable to bonds and mortgage rates, but the GDP reading will be the biggest influence on trading and rates Friday morning.

The last report of the week is the revised reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer confidence, which is thought to indicate consumer willingness to spend. I don’t see this data having much of an impact on the markets or mortgage rates due to the importance of the employment index and GDP figures.

Overall, look for Tuesday or Friday to be the biggest days for mortgage rates. Friday’s GDP is the single most important piece of data this week, but we may see quite a bit of movement in rates Tuesday also. If we see weaker than expected results from the most important reports, we should see rates close the week much lower than last Friday’s closing levels. If the data shows stronger than expected results, we may see mortgage rates move higher again this week. This is of course, assuming that the Fed meeting doesn’t reveal any surprises. I strongly recommend that fairly constant contact is maintained with your mortgage professional this week if still floating an interest rate.

If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.