Wednesday's bond market has opened in negative territory again with the stock markets showing gains. The Dow is currently up 44 points while the Nasdaq has gained 10 points. The bond market is currently down 10/32, but we will likely see a slight improvement in this morning's mortgage pricing due to strength in bonds late yesterday.

Today's only relevant report is the Fed Beige Book at 2:00 PM ET. It details economic activity throughout the country by region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trading. It probably will not cause a major sell off in the stock or bond markets, but could cause enough movement in bond prices to possibly improve or worsen mortgage rates slightly if it reveals any significant surprises.

There are two reports scheduled for release tomorrow morning. The first is the revised Productivity index for the 4th Quarter of last year. The preliminary r eading posted last month showed an annual rate of 6.2% increase in worker output. Analysts are expecting to see little change to the initial reading. Employee productivity is watched fairy closely because a higher level of output per hour is believed to mean that the economy can expand without inflation concerns.

January's Factory Orders will be posted late tomorrow morning, which will give us another measurement of manufacturing sector strength. This data is similar to last week's Durable Goods, except this report covers orders for both durable and non-durable goods. Current forecasts are calling for an increase in new orders of approximately 1.8%. A smaller than expected increase would be good news for the bond market and should lead to a small improvement in mortgage rates.

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... 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.

This week brings us the release of six economic reports to be concerned with. Two of the reports are considered to be very important, but nearly all of the week's releases have the potential to affect mortgage rates. With reports being posted each day except Tuesday, we will likely see a fairly active week in mortgage rates.

The week's first data comes tomorrow morning with the release of two relevant reports. The first is January's Personal Income ad Outlays data at 8:30 AM ET, which gives us an indication of consumer ability to spend and current spending habits. Current forecasts call for an increase in income of 0.4% while spending is expected to rise 0.4%. A larger than expected increase in spending would be bad news for the bond market and could drive mortgage rates higher. However, weaker than expected numbers should help push mortgage rates slightly lower tomorrow.





The Institute for Supply Management (ISM) will release th eir manufacturing index for February late tomorrow morning. This index measures manufacturer sentiment and can have a pretty large impact on the financial and mortgage markets if it varies from forecasts. It is expected to show a decline from January's 58.4 to 57.8 this month. This is important because a reading above 50.0 means more surveyed manufacturers felt business improved during the month than those who felt it had worsened, meaning likely growth in the manufacturing sector. If we see a weaker than expected reading, the bond market could rally. But, a higher than forecasted reading could lead to major selling in bonds, causing mortgage rates to rise tomorrow morning.

The Fed Beige Book is the next report scheduled for release and it will be posted Wednesday afternoon. This report details economic activity throughout the country by region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trad ing Wednesday. It probably will not cause a major sell off in the stock or bond markets, but could cause enough movement in bond prices to possibly improve or worsen mortgage rates slightly if it reveals any significant surprises.

There are two reports scheduled for release Thursday morning. The first is the revised Productivity index for the 4th Quarter of last year. The preliminary reading posted last month showed an annual rate of 6.2% increase in worker output. Analysts are expecting to see no change to the initial reading. Employee productivity is watched fairy closely because a higher level of output per hour is believed to mean that the economy can expand without inflation concerns.





January's Factory Orders will be posted late Thursday morning, which will give us another measurement of manufacturing sector strength. This data is similar to last week's Durable Goods, except this report covers orders for both durable and non-du rable goods. Current forecasts are calling for an increase in new orders of approximately 1.2%. A smaller than expected rise would be good news for the bond market and could lead to an improvement in mortgage rates.

The biggest news of the week comes Friday morning when one of the single most important monthly reports we see will be posted. The Labor Department will release February's Employment report at 8:30 AM ET Friday. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a large drop in payrolls and little or no increase in earnings. Current forecasts are calling for 0.1% increase in the unemployment rate to 9.8% and approximately 20,000 jobs lost during the month.

Overall, look for a fairly active week for mortgage rates. Friday is undoubte dly the biggest day of the week, but tomorrow may also bring noticeable movement in mortgage rates. It is fairly safe to label Tuesday the least important with no relevant data scheduled for release, but we may see movement in rates several days this week.

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.

Wednesday's bond market had initially opened down slightly but has since moved into positive territory during Fed Chairman Bernanke's congressional testimony. The stock markets are posting fairly strong gains after the Senate passed a $15 billion jobs creation bill. The Dow is currently up 75 points while the Nasdaq has gained 20 points. The bond market is currently up 4/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.

January's New Home Sales report was posted late this morning, showing a surprising drop in sales of newly constructed homes. The 11.2% decline in sales last month dropped them to their lowest level on record. That indicates that the housing sector is not as stabile as some wanted to believe and can be good news for the bond market. However, this data covered only approximately 15% of all home sales in the U.S. Friday's Existing Home Sales report tracks the other 85% of sales.

Cha irman Bernanke is in the process of delivering the Fed's semi-annual testimony on the status of the economy to the House Financial Services Committee. During his prepared statement he indicated concern about the employment sector and the unemployment rate that is expected to remain high for quite some time. He also said that he expects inflation to remain under control. Both were good news for the bond market and helped move bonds into positive ground.

He will continue to answer questions from committee members and any surprise answers could lead to more volatility in the markets today. He will repeat this performance for the Senate Banking committee tomorrow, but the second day usually does not bring many surprises. The prepared statement will likely be quite similar to today's speech, so any shocking developments will have to come from the Q & A part of the proceeding.

The only important data scheduled for release tomorrow is January's Durable Go ods Orders data. This data gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. A smaller increase than the 1.4% that is expected would be good news for the bond market and mortgage rates. This data is quite volatile from month-to-month, so large swings are fairly normal.

We will also get weekly unemployment figures from the Labor Department, but unless there is a wide variance between the announced number of new claims and the 460,000 total that is expected, this data will probably have little impact on tomorrow's mortgage pricing.

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 w hat 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.

Short Term Lock/Float Bias and the Week Ahead

Mortgage rates rose, stabilized, then rose again and again and again on Friday last week. That's a three day skid of rising rates. Economic data wasn't necessarily great, but it wasn't bad either. The Federal Reserve did hike the rate at which they lend emergency funds to banks in need. While this event did cause a commotion and alter market sentiment, the net effect was not seen as a reason behind increases in mortgage rates. The Federal Reserve's planned exit from the secondary mortgage market has also played a minimal role in rising rates. The general explanation behind rising mortgage rates has been a slow and steady uptick in benchmark Treasury yields. Because mortgage-backed security yields track the direction of benchmark Treasury yields, mortgage rates have been generally higher lately.

There are several technical and fundamental reasons behind rising government borrowing costs (benchmark Treasuries), but the all encompassing explanation is that economist outlooks are "less bad". A record economic contraction now appears to have stabilized. The record dip in stocks that came along with it has almost completely corrected, and benchmark Treasury yields are now rising from all-time record lows. 2009 was a year of extremes, something we all grew accustomed to, but something that is not expected to continue forever.

As long as nothing drastically negative occurs economically or financially in the next few months, which global governments have been diligently responsive to, mortgage rates are expected to continue to gradually rise. Unless housing really falls flat on it's face when the Federal Reserve exits the secondary mortgage market, which we are not expecting.

Today was a very slow day in the rates marketplace but the week ahead is full of Fed speak and plenty of economic data.

Here are the highlights:

Tuesday

• S&P Case Shiller Home Price index (medium impact unless its really far from expectations)
• Consumer Confidence (medium impact)
• $44 billion 2 year notes will be auctioned by the US Treasury (more than medium impact less than big impact)
• St. Louis Federal Reserve Bank President James Bullard speaks in Virginia on regulatory reform (more than low impact less than medium, next guy overshadows)
• Ben Bernanke, chairman of the Federal Reserve, speaks before the House Financial Services Committee. The hearing is called “Prospects for Employment Growth: Is Additional Stimulus Needed?” (high impact)

Wednesday

• MBA Applications Index (low impact)
• New Home Sales (medium impact. high impact if S&P surprises in either direction)
• Ben Bernanke delivers his semiannual Monetary Policy Report to House Financial Services Committee (high impact)
• $42 billion 5 year notes will be auctioned by the US Treasury (more than medium impact less than big impact)

Thursday

• Durable Goods Orders (probably medium impact. potential for high impact)
• Initial Jobless Claims, Continued Jobless Claims, Emergency Benefits (medium impact. high impact if Bernanke says something like the labor market is weaker than anticipated)
• Ben Bernanke continues repeats his semiannual Monetary Policy Report to Senate Banking Committee. (Q&A will be high impact)
• James Bullard speaks again, this time in Texas regarding the economy. (low impact. Bernanke overshadows)
• $32billion 7 year notes will be auctioned by the US Treasury (high impact potential)

Friday

• Advance 4th Quarter GDP is revised to Preliminary 4th Quarter Real GDP read. One more revision after this revision. (medium impact if better. high impact if revision is down)
• Chicago Purchasing Managers Index (more than low impact. less than medium impact)
• Consumer Sentiment (medium impact)
• Existing Home Sales (medium impact if as expected. high impact if far from forecasts)

For a more in-depth discussion, read MND's The Week Ahead

Reports from fellow mortgage professionals indicate lenders offered slightly improved mortgage rate pricing today. The par 30 year conventional rate mortgage has fallen back to the 4.875% to 5.125% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. You may elect to pay less in upfront costs, but you will have to accept a higher interest rate.

It will be a very busy week of economic data releases and headline news events. We have casually discussed the idea of a short term float position. This is a very risky move, but if you are approaching the 10 day window to lock your loan, and have a few days to watch, there might be an opportunity to pick up 0.125% in rate. That's really not much in the grand scheme of things unless you are floating a high-cost area loan amount.

With that said, if you are 20 days out of closing, I still I favor locking over floating.

This week brings us the release of six pieces of economic data for the bond market to digest along with some very important testimony from Fed Chairman Bernanke. Two of the reports are considered to be of low importance, but since we have data being posted every day of the week except for tomorrow, it is likely that we will see plenty of movement in mortgage rates the next few days.

None of this week's economic data is scheduled for release tomorrow. We do, however, have Congressional testimony by Chairman Bernanke late tomorrow morning. He will be speaking to a House Financial committee about employment growth and whether further stimulus is needed. These are hot topics so his words may influence the markets and possibly mortgage rates.





Tuesday morning brings us the first of this week's data with the release of February's Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consum er confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show a decline in confidence from 55.9 in January to 55.0 this month. A lower reading would be considered good news for bonds and mortgage rates.

January's New Home Sales report will be posted late Wednesday morning. This is one of the least important reports of the week, and it is the sister report to Friday's Existing Home Sales release. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates. They are both expected to show an increase in sales.





Mr. Bernanke will deliver the Fed's semi-annual testimony on the status of the economy late Wednesday and Thursday mornings. He will be speak ing to the House Financial Services Committee Wednesday and the Senate Banking Committee Thursday. Market participants will watch the Fed Chairman's words very closely. He is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what he says during this testimony. Look for him to address the unemployment and housing crises specifically and their impact on the overall economy. His testimony begins at 10:00 AM ET with a prepared statement then is followed by Q & A with committee members. I am expecting to see the markets fluctuate during this session, possibly affecting mortgage rates also.

The only important data scheduled for release Thursday is January's Durable Goods Orders data. This data gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. A smaller increase than the 1.5% that is expected would be good news for the bond market and mortgage rates. This data is quite volatile from month-to-month, so large swings are fairly normal.

The first of two revisions to the 4th Quarter GDP reading is scheduled for release Friday morning. Analysts' forecasts currently call for an annual rate of growth of 5.6%, indicating that the economy was slightly weaker in the last quarter of the year than initially thought. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market, while a sizable downward revision would be good news and could lead to improvements in mortgage pricing.





The last piece of data scheduled for release this week is the University of Michigan's revision to their Index of Consumer Sentiment for February. Current forecasts show this index revising sligh tly higher than previously thought. The preliminary reading was 73.7 and is now expected to stand at 73.9, indicating that consumer sentiment was slightly stronger than previously thought. This index is fairly important because it helps us measure consumer confidence that translates into consumer willingness to spend.

In addition to this week's economic reports and Chairman Bernanke's speaking dates, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds tha t follows usually translates into lower mortgage rates.





Overall, look for plenty of movement in bond prices and mortgage rates this week. I think we will see the most movement either Wednesday or Thursday, but Friday may be fairly active also. This would be a very good week to maintain contact with your mortgage professional, especially 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... 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.