Tuesday, November 19, 2013 - Article by: James Brooks - Polaris Home Funding Corp -
By James Brooks
The bond market is currently down 3/32, which should keep this this morning's mortgage rates very close to yesterday's morning pricing. The 10-year Treasury Note yield did close below 2.70% yesterday (currently 2.69%), so we also should be watching it to move further below that level or pop back above. Such a move would help indicate mortgage rate direction, assuming tomorrow's reports and news show no surprises.
The 3rd Quarter Employment Cost Index (ECI) was released early this morning, revealing a 0.4% increase. This was just slightly weaker than the 0.5% that was forecasted, meaning employer costs for wages and benefits did not rise as much as many had thought. That makes the data favorable for the bond market and mortgage rates but it was not enough of a variance to have much of an impact on today's pricing.
Tomorrow is the most active day of the week in terms of scheduled events relevant to mortgage rates with four that we need to watch. Two of the day's economic releases are considered highly important to the bond market. The Commerce Department will give us one of those when they post October's Retail Sales figures at 8:30 AM ET tomorrow. This data measures consumer level or retail spending. It is considered extremely important to the markets because it makes up over two-thirds of the U.S. economy. It is expected to show a 0.1% increase in retail-level spending, meaning consumers spent just a bit more last month than they did in September. A larger increase in spending would be considered negative news for bonds because rising spending fuels economic growth and raises inflation concerns in the bond market. If tomorrow's report reveals a decline in spending that indicates consumers spent less than thought, bonds should react favorably, pushing mortgage rates lower. If it shows an unexpected increase, mortgage rates will likely move higher.
The second report of the morning will be the release of October's Consumer Price Index (CPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The CPI measures inflationary pressures at the consumer level of the economy and is one of the most important reports the bond market sees each month. 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 it reveals stronger than expected readings, indicating that inflationary pressures are rising at the consumer level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see no change in the overall reading and a 0.2% increase in the core data.
October's Existing Home Sales data will be posted by the National Association of Realtors at 10:00 AM ET tomorrow morning. It gives us a measurement of housing sector strength and mortgage credit demand by tracking home resales in the U.S. This report is expected to show a small decline in sales, meaning the housing sector weakened slightly last month. That would be good news for the bond market and mortgage pricing, but unless it shows a significant surprise, it will likely not have a major impact on mortgage rates.
The final relevant event of the day is the release of the minutes from the last FOMC meeting. Traders will be looking for any indication of the Fed's next move regarding monetary policy or potential tapering of their current bond purchases. They will be released at 2:00 PM ET, so any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a non-factor. If they show anything surprising, we may see some movement in rates Wednesday afternoon, but it is more likely there will be little reaction.
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.
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