DAILY RATE LOCK RECOMMENDATION JUNE 27 2010

This week brings us the release of five economic reports for the markets to digest, but four of them are considered to be important and one of those four is arguably the most influential report we see each month. There is relevant data being released each day except Wednesday, so it will likely be an active week for mortgage rates.

May's Personal Income and Outlays data will be posted early tomorrow morning. This report gives us an indication of consumer ability to spend and current spending activity. They are important because consumer spending makes up two-thirds of the U.S. economy. If consumer income is rising, they have more money to spend each month. Analysts are expecting to see an increase of 0.5% in income and a 0.1% rise in the spending portion of the report. Smaller than expected increases should be good news for the bond market and mortgage rates.

June's Consumer Confidence Index (CCI) is the second report of the we ek. It will be posted late Tuesday morning. It is important to the financial markets because it measures consumer willingness to spend. If consumers are more confident about their own financial situations, they are likely more apt to make large purchases in the near future. If it shows a sizable increase in confidence from last month, we can expect to see the bond market falter and mortgage rates rise slightly. Current forecasts are calling for a reading of 62.0, down from last month's 63.3 reading.

The Institute of Supply Management (ISM) will release their manufacturing index for June late Thursday morning. This index measures manufacturer sentiment by surveying trade executives on current business conditions. A reading above 50 means that more surveyed executives felt business improved during the month than those who felt it had worsened. Analysts are expecting a reading of 59.0. That would indicate that manufacturers felt business worsened from the previous m onth, when we saw a 59.7 reading. Good news for bonds and mortgage rates would be a weaker than expected reading.

The remaining two reports will be released Friday morning. The Labor Department will post June's unemployment rate, number of new payrolls added or lost and average hourly earnings early Friday morning. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, a large decline in payrolls and no change in earnings. Weaker than expected readings would likely help boost bond prices and lower mortgage rates Friday. However, stronger than expected readings could be extremely detrimental to mortgage pricing. Analysts are expecting to see the unemployment rate rise 0.1% to 9.8%, with 100,000 jobs lost and a 0.1% rise in earnings.

The Commerce Department will post May's Factory Orders data late Friday morning, which i s similar to the Durable Goods Orders report that was released last week. The biggest difference is that this week's report covers both durable and non-durable goods. It usually doesn't have as much of an impact on the bond market as the durable goods data does, but can lead to changes in mortgage pricing if it varies greatly from forecasts because it measures manufacturing sector strength. Current expectations are showing a 0.7% decline in new orders from April's levels. A larger decline in orders would be considered good news for the bond market and could help lower mortgage rates slightly Friday. However, the employment data is much more important to the markets than this report is.

Overall, Tuesday and Thursday's data should bring some volatility in trading and mortgage rates, but Friday's Employment report is definitely the most important of the week. Its impact can single-handedly lead to an improvement or increase in mortgage rates for the week. Next Monday is when the Independence Day holiday will be recognized. There is no early close for the bond market Friday ahead of it, but it will probably be a light afternoon in trading as traders head home for the long weekend. This could lead to additional volatility during morning trading, particularly with the Employment report being posted. So, I strongly recommend that you maintain contact with your mortgage professional if still floating an interest rate.

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... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... 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.

©Mortgage Commentary 2010
Information provided by Alamode Inc