This week will be very important for mortgage rates despite the fact that there are only three relevant factual economic reports scheduled for release. It is the first post-holiday week of trading, which means that we should see more trading volume in the markets. Even though there are only three reports scheduled, two of them are considered to be of high importance to the bond and mortgage markets. This means that we may see fairly significant changes to rates more than one day, especially since it is a shortened trading week.
The financial markets will be closed on Monday, January 2nd in observance of the New Year’s Day holiday. The stock markets will also be closed on Tuesday, January 3rd, due to the national day of mourning of former President Gerald Ford. However, the bond market will open Tuesday, but close at 2:00 PM ET. Most lenders will be closed tomorrow and open for business Tuesday.
Wednesday brings us the release of the Institute for Supply Management (ISM) manufacturing index. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are currently expecting to see a 50.0 reading in this month’s release, meaning that sentiment rose slightly from November’s 49.5. A smaller reading will be good news for the bond market and mortgage shoppers while a higher than expected reading could lead to higher mortgage rates Wednesday morning.
Also Wednesday will be the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed’s thinking and concerns regarding inflation and monetary policy. It may also help form opinions of the Fed’s future moves toward interest rates. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they shouldn’t affect the markets or mortgage rates until afternoon hours.
The Commerce Department will post November’s Factory Orders data late Thursday morning, giving us an important measurement of manufacturing sector strength. This report is similar to the Durable Goods Orders release that was posted late last month, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see an increase of 1.4% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a small change in rates.
The final report of the week comes Friday morning when the Labor Department posts December’s employment figures. The Employment report is considered to be one of the most important monthly releases that we see. It gives us the national unemployment rate, the number of jobs added or lost during the month, and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a smaller than expected increase in new payrolls and a small increase or even a decrease in earnings, would be good news for the bond market.
Current forecasts call for no change in the unemployment rate of 4.5% from November to December. Analysts are expecting to see an increase in new payrolls in the neighborhood of 110,000 with earnings rising 0.3%. If we see much fewer than 110,000 new jobs, we should see mortgage rates drop considerably Friday. However, stronger than expected readings will likely push mortgage rates higher.
Overall, the key data of the week will be Wednesday’s ISM index and Friday’s Employment report, which could set the tone for the bond market and mortgage pricing for the next few weeks. If they show weaker than expected results, mortgage rates should move lower for the week.
Craig Higdon has over 14 years experience in financing commercial loans, small business loans, construction loans, and land loans. He owns Excelsion Mortgage, a commercial mortgage brokerage offering real estate investors a wide range of resources to help them in their investment activities.
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Mortgage Loan Market Commentary
AN IMPORTANT WEEK FOR MORTGAGE RATES
This week will be very important for mortgage rates despite the fact that there are only three relevant factual economic reports scheduled for release. It is the first post-holiday week of trading, which means that we should see more trading volume in the markets. Even though there are only three reports scheduled, two of them are considered to be of high importance to the bond and mortgage markets. This means that we may see fairly significant changes to rates more than one day, especially since it is a shortened trading week.
The financial markets will be closed on Monday, January 2nd in observance of the New Year’s Day holiday. The stock markets will also be closed on Tuesday, January 3rd, due to the national day of mourning of former President Gerald Ford. However, the bond market will open Tuesday, but close at 2:00 PM ET. Most lenders will be closed tomorrow and open for business Tuesday.
Wednesday brings us the release of the Institute for Supply Management (ISM) manufacturing index. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are currently expecting to see a 50.0 reading in this month’s release, meaning that sentiment rose slightly from November’s 49.5. A smaller reading will be good news for the bond market and mortgage shoppers while a higher than expected reading could lead to higher mortgage rates Wednesday morning.
Also Wednesday will be the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed’s thinking and concerns regarding inflation and monetary policy. It may also help form opinions of the Fed’s future moves toward interest rates. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they shouldn’t affect the markets or mortgage rates until afternoon hours.
The Commerce Department will post November’s Factory Orders data late Thursday morning, giving us an important measurement of manufacturing sector strength. This report is similar to the Durable Goods Orders release that was posted late last month, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see an increase of 1.4% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a small change in rates.
The final report of the week comes Friday morning when the Labor Department posts December’s employment figures. The Employment report is considered to be one of the most important monthly releases that we see. It gives us the national unemployment rate, the number of jobs added or lost during the month, and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a smaller than expected increase in new payrolls and a small increase or even a decrease in earnings, would be good news for the bond market.
Current forecasts call for no change in the unemployment rate of 4.5% from November to December. Analysts are expecting to see an increase in new payrolls in the neighborhood of 110,000 with earnings rising 0.3%. If we see much fewer than 110,000 new jobs, we should see mortgage rates drop considerably Friday. However, stronger than expected readings will likely push mortgage rates higher.
Overall, the key data of the week will be Wednesday’s ISM index and Friday’s Employment report, which could set the tone for the bond market and mortgage pricing for the next few weeks. If they show weaker than expected results, mortgage rates should move lower for the week.
Craig S. Higdon, “The Investment Property Insider”
www.ExcelsionMortgage.com, www.InvestmentPropertyInsider.com
Craig Higdon has over 14 years experience in financing commercial loans, small business loans, construction loans, and land loans. He owns Excelsion Mortgage, a commercial mortgage brokerage offering real estate investors a wide range of resources to help them in their investment activities.
This entry was posted on Tuesday, January 2nd, 2007 and is filed under -Mortgage Loan Market Commentary. You can follow any responses to this entry through RSS 2.0. You can leave a response, or trackback from your own site.