Today's Commentary

Updated on September 2, 2014 11:12:04 AM EDT
Tuesday’s bond market has opened well in negative ground despite a calm open in stocks. The major stock indexes are showing relatively minor gains with the Dow up 11 points and the Nasdaq up 16 points. The bond market is currently down 16/32 (2.39%), which should push this morning’s mortgage rates higher by approximately .250 of a discount point over Friday’s pricing (markets were closed yesterday due to holiday).

The week’s economic calendar opened late this morning when the Institute for Supply Management (ISM) posted their manufacturing index for August at 10:00 AM ET. They announced a reading of 59.0 that exceeded forecasts of 56.9, indicating surveyed manufacturers were much more optimistic about business conditions last month than many had thought. That is bad news for the bond and mortgage markets because a strengthening manufacturing sector makes broader economic growth more likely.

Tomorrow has three reports set for release that may influence rates. The first is the ADP Employment report at 8:15 AM ET. This report has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. It tracks changes in private-sector jobs of the company's clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not very accurate in predicting results of the monthly government report that follows a couple days later. Still, because we sometimes see a noticeable reaction to the report, it is on this week's calendar.

The second report of the morning will come from the Commerce Department, who will post July's Factory Orders data at 10:00 AM ET. This manufacturing sector report is similar to last week's Durable Goods Orders release, but also includes orders for non-durable goods. It can impact the bond market enough to change mortgage rates if it varies from forecasts by a wide margin. Analysts are forecasting an increase of 11.0% in new orders, meaning manufacturing activity spiked in July due to the whopping increase in airplane orders that drove the Durable Goods report last week. A much smaller increase would be good news for the bond market and mortgage pricing, but I don’t believe this report will cause too much of a reaction in mortgage rates.

Lastly, the Federal Reserve will release its Beige Book report at 2:00 PM ET tomorrow. This report details current economic conditions in the U.S. by Federal Reserve regions. It is believed to be a key source of information when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises or changes from the previous release, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed's next monetary policy move.

Overall, this is likely to be a highly active week for the financial markets and mortgage pricing. Friday is the key day with the Employment report being released but we could see noticeable movement in rates any day. We also need to watch the Ukraine crisis as further escalation will likely cause ripples in the world markets and here. With so much important data scheduled and the potential for geopolitical influence, I strongly recommend maintaining contact with your mortgage professional if still floating an interest rate and closing in the near future.

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... Lock 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 2014
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