This weeks mortgage market

Here's your Daily Commentary report compliments of Jeff Drew and Star Mortgage!

There are several important pieces of economic news scheduled for release this week, but three stand out above the others. There are a total of six reports scheduled, so it can be considered a fairly active week. There is no relevant data due out tomorrow, so expect the stock markets to help drive bond trading and mortgage rates.

March’s Goods and Services Trade Balance report will be released early Tuesday 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 the least important of this week’s data.

The first important piece of data is the release of April’s Retail Sales early Wednesday morning. This is an extremely important report for the financial markets as it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.1% decline in sales from March to April. A weaker than expected level of sales should push bond prices higher and mortgage rates lower Wednesday. However, a larger increase could fuel bond selling and lead to higher mortgage rates.

The second important report of the week is April’s Producer Price Index (PPI) early Thursday morning, which 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 and stock markets rally. The overall index is expected to show an increase of 0.1%, while the core data that excludes food and energy prices is also expected to rise 0.1%. A smaller than expected increase in the core data would be ideal for mortgage shoppers. There are three relevant reports scheduled to be posted Friday. The first is the week’s most important. April’s Consumer Price Index (CPI) will be posted at 8:30 AM. It is similar to Thursday’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. Its results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing. Current forecasts are calling for no change in the overall index and a 0.1% increase in the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices.

April’s Industrial Production is Friday’s second relevant report. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.6% decline in production, indicating that manufacturing activity is slowing rapidly. A larger decline in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is weaker than expected. The last report of the week is May's preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. It is expected to show a reading of 65.0, which would be little change from last month’s final reading. If it shows a decline in consumer confidence, bond prices will likely rise, assuming the CPI does not give us a significant surprise.

Overall, it likely will be a pretty active week for mortgage rates. Besides the week’s important economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Friday with three reports on the agenda, including the CPI. But Wednesday is important due to the Retail Sales report. I am expecting to see several noticeable changes to rates this week, and would not be surprised to see multiple intra-day revisions also. Accordingly, please be attentive to the markets 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... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now...


©Mortgage Commentary 2009


* Please note that if you have a mortgage rate and monthly payment you are comfortable with you may want to consider locking that rate. It is very difficult to predict the market in these very volatile times. Most lenders have a mortgage rate renegotiation policy. Contact me for details.