GEORGIA MORTGAGE MARKET COMMENT Ocotober 11, 2010
Cobb County Atlanta, Georgia: Overall, I am expecting to see a fair amount of mortgage rate movement in mortgage rates this week, especially the latter part of the week.
GAS IS UP! MEAT IS UP! CORN IS UP! and trend is starting to develop. The key reports come Friday, so we can label it the most important day of the week. But the active week for corporate earnings can also heavily influence trading 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 rates yet. Please see Georgiamortgagerates.emortgageco.com to see competitive pricing we serve all of Georgia now in our 17th year.
This week brings us the release of five 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 the earnings reports 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.
We are open today helping are clients but the bond market is closed todayi n observance of the Columbus Day holiday and will reopen Tuesday morning. 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 pricin g early Tuesday morning. I suspect many mortgage lenders will be closed tomorrow, as will U.S. banks. If anyone is open for business and does post rates tomorrow, you can expect to see an increase of approximately .125 - .250 of a discount point from Friday's morning pricing due to weakness in bonds late Friday afternoon.
The first piece of data comes at 2:00 PM ET Tuesday 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 inflation and the Fed's next move. If Fed members were concerned about inflationary pressures, we may see the bond market move lower and mortgage rates higher Tuesday afternoon. However, if they repeat recent comments and statements that inflation is not of much concern and that there is still considerable concern about the economy, we should see little reaction in mortgage rates or a small improv ement. Also worth watching is any discussion about the Fed getting more involved with purchasing government or mortgage debt. Any indication of them making more purchases should be taken as very good news for mortgage rates and will likely lead to lower rates Tuesday afternoon.
Wednesday's only event 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.
September's Producer Price Index (PPI) will be release early Thursday morning. This is one of the two very important inflation readings we get each month. This index measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.2% increase in the overall index and a 0.1% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. A larger than expected increase could fuel inflation concerns in the bond market and push mortgage rates higher. However, weaker than expected readings should lead to lower rates Thursday.
August's Trade Balance report will also 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 $44.5 billion deficit, but it will take a wid e variance to directly influence mortgage pricing, especially since an important inflation report is also being posted at the same time.
The week closes with three reports being posted Friday morning, two of which are extremely important to the markets and mortgage rates. The first is 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 0.4% increase in sales. Good news for the bond market and mortgage pricing would be a smaller increase.
Friday's second major economic release is September's Consumer Price Index (CPI). It measures inflationary pressures at the consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see a rise of 0.2% in the overall index and an increase of 0.1% in the core data reading. A larger than expected increase in the core reading could raise inflation concerns in the bond market and push mortgage rates higher. Inflation is the number one nemesis of the bond market because it erodes the value of a bond's future fixed interest payments. When inflation is a threat, bonds sell for discounted prices that push their yields higher. And since mortgage rates tend to follow bond yields, this leads to higher rates for mortgage borrowers. This is one of the most important reports we see each month, so its impact on mortgage rates could be significant.
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 two reports, I suspect this data will have little impact on mortgage rates. It is expected to show a reading of 68.6, up slightly from September's final of 68.2.
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... 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. Please call or email if we I can help.