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This holiday-shortened week brings us the release of only three relatively minor monthly or quarterly economic reports for the markets to digest along with two relevant Treasury auctions. With none of the data considered to be key or highly important, I suspect we will see less volatility in rates than we saw last week. The bond market will be closed tomorrow in observance of the Veteran’s Day holiday, but the stock markets will be open for business. While we may see some lenders open for business, many likely will not issue new rates or lock agreements until Tuesday morning when the bond market reopens. Because the bond market is closed tomorrow, there will be no update to this report.
The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two for mortgage rates as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds The first monthly data of the week is September’s Goods and Services Trade Balance report early Thursday morning. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. Analysts are expecting to see a $39.0 billion trade deficit that would be just slightly higher than the $38.8 billion from August.
Also early Thursday morning is the release of the 3rd Quarter Productivity reading. It is expected to show a 2.0% increase in worker productivity during the third quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern. This data usually has a minimal impact on mortgage rates unless it shows a significant variance from forecasts.
The week closes with another moderately important release mid Friday morning. October’s Industrial Production data will be posted at 9:15 AM ET Friday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.2% increase in production, indicating little strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but as with the rest of the week’s other reports, this is not expected to greatly influence the markets. Therefore, it will likely take a sizable variance from forecasts for it to have a noticeable impact on mortgage pricing.
Overall, there isn’t a specific day that stands out as the most important day of the week. None of the data is likely to lead to a sizable change in mortgage rates, so if there are any significant moves in rates they will probably come from other sources such as a huge stock rally or sell-off. Wednesday’s 10-year Note auction could be interesting and will have a direct impact on rates, so by default we will label it as the most important day. Tuesday may also be an active day as the bond market opens after the Friday sell-off that was followed by a three day weekend. I never recommend ignoring the markets as momentum can pick up or change direction unexpectedly at any time. However, after we get past Tuesday’s potential uneventful or highly active open, I just don’t see anything to be too concerned or optimistic about.