Mortgage Rate Commentary

Scenic Oaks Funding Mortgage Rate Commentary This week bring us the release of only three monthly reports that are relevant to the bond market and mortgage rates, but two of them are considered to be highly important. In addition to those three reports, we also will get the minutes from the last FOMC meeting that may influence the markets and possibly mortgage rates.

The first report is the Institute for Supply Management’s (ISM) manufacturing index for December late tomorrow morning. This highly important index measures manufacturer sentiment.

The Commerce Department will post November’s Factory Orders data late Tuesday morning. 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 minor change in rates. The larger the decline, the better the news for mortgage rates.

Also Tuesday is the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed’s thinking and concerns regarding the economy, inflation and monetary policy. 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.

The final report of the week comes Friday morning when the Labor Department will post December’s employment figures. The Employment report is arguably the most important monthly release 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 larger than expected drop in new payrolls and a decline in earnings would be ideal news for the bond market and mortgage rates.

Also worth mentioning is an appearance by Fed Chairman Bernanke in front of the Senate Budget Committee late Friday morning. We will give testimony about monetary policy, economic conditions and fiscal issues. The markets pay close attention whenever he speaks, so any surprises in his words will cause volatility in the financial markets and mortgage rates.

Overall, the key data of the week will be Friday’s Employment report, but look for tomorrow and Tuesday to be active due to the economic data and FOMC minutes scheduled. If they give us favorable results, mortgage rates will likely move lower for the week. But if not, we can expect to see mortgage rates move higher.

Below is a chart of the 10-Year bond over the last month. Although mortgage rates do not directly mirror the 10-year bond, they do follow the direction of the 10-year bond. As you can see the mortgage rates have been on the rise over that past month.

image001 Mortgage Rate Commentary