April 1st, 2013
This week brings us the release of four economic reports that have the potential to move mortgage rates with two of them considered to be highly important to the markets. There were also two economic reports posted Friday even though the financial markets were closed due to the Good Friday holiday. Both of those reports gave us stronger than expected results and since the markets were unable to react to them, we may see some pressure in bonds early Monday morning.
The first report is one of those highly important and comes late Monday morning when the Institute for Supply Management (ISM) will release their manufacturing index. This index gives us an important measurement of manufacturer sentiment by surveying trade executives. A reading above 50 means more surveyed executives felt business improved during the month than those who said it had worsened. This month’s report is expected to show a reading of 54.0, which would be a slight decline from February’s reading of 54.2. This means that analysts think business sentiment remained fairly flat from last month’s level. That would be relatively good news for the bond market and mortgage rates. A noticeable decline would be favorable for rates while an increase would be negative.
February’s Factory Orders will be released late Tuesday morning. This data is similar to last week’s Durable Goods Orders report, except it includes orders for both durable and non-durable goods, giving us another measurement of manufacturing sector strength. It is one of the week’s least 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.
Wednesday’s data does not come from a government agency or traditionally reliable source. There are a couple of private sector employment-related reports being posted, but they are not considered highly important to the bond market or mortgage rates. These reports are not always accurate in predicting results of government reports, so they usually do not have much of an impact on bond trading or mortgage pricing. We do see some reaction to them if they reveal a surprisingly significant indication of employment strength or weakness. However, I don’t believe they deserve much concern or attention in regards to mortgage pricing.
Thursday doesn’t have any monthly or quarterly economic reports set for release. It does however, bring us the weekly unemployment update and a couple of central bank announcements from overseas, which are equivalent to our FOMC meetings. Depending on what is said, they could heavily influence the global markets or be non-factors. Focus will be on the European Central Bank (ECB) with the recent events in Cyprus and what impact their situation may have on the Eurozone’s economy and financial system. More trouble ahead in the zone should boost bond prices and lower mortgage rates Thursday morning.
The biggest news of the week will come early Friday morning when the Labor Department posts March’s Employment report, giving us the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate remained at 7.7% and that approximately 178,000 payrolls were added during the month. A higher unemployment rate and a smaller than expected payroll number would be good news for bonds and would likely push mortgage rates lower Friday morning because it would indicate weaker than thought conditions in the employment sector of the economy. On the other hand, stronger than expected results will probably fuel a stock rally that leads to a sizable increase in mortgage pricing.
February’s Goods and service Trade Balance will also be released early Friday morning. It will give us the size of the U.S. trade deficit, but is not considered to be of high importance to the markets or mortgage rates. This report usually has little impact on mortgage rates unless it shows a significant variance from forecasts and if there is no other data to drive trading that day. It is expected to show a trade deficit of $44.6 billion, but since the Employment report is also being released Friday morning, regardless of its results, I doubt this data will have an impact on mortgage rates.
Overall, Friday is the biggest day of the week due to the significance of the Employment report but I suspect we will have an active day Monday in mortgage rates also. The middle part of the week should be relatively calm, at least compared to Monday and Friday’s trading. However, we can see the markets change quickly any day, so please proceed cautiously if still floating an interest rate and closing in the near future