Financing Homes in Lake Tahoe and Truckee since 1992.

Morning Economic Update-June 4, 2013

Tahoe Mortgage Rates and Tahoe Home Loan Rates:

Tuesday’s bond market has opened in negative territory, extending yesterday’s late weakness. Stocks are showing relatively minor gains with the Dow up 21 points and the Nasdaq up 7 points. The bond market is currently down 8/32, which should push this morning’s mortgage rates higher by approximately .250 – .375 of a discount point over yesterday’s morning pricing. The rally in bonds yesterday morning fizzled during afternoon trading, causing some lenders to revise pricing higher late in the day. If your lender did revise higher, you probably will see less of an increase in this morning’s pricing.

April’s Goods and Services Trade Balance was this morning’s only report. It revealed a $40.3 billion trade deficit that was a little smaller than forecasted. However, as expected, the data did not have much of an influence on this morning’s trading and mortgage pricing since it wasn’t a significant variance in a low importance report. In fact, it is this week’s least important release and usually does not directly affect mortgage rates. The data can impact the value of the U.S. dollar versus other currencies, which indirectly affects bond trading. A stronger dollar makes U.S securities more attractive to foreign investors as the proceeds of those securities are worth more when converted to the investors’ own currency. Still, the results drew little attention in this morning’s trading.

Tomorrow has three pieces of economic data that are relevant to the bond market and mortgage rates. The first is the revised 1st Quarter Productivity and Costs data at 8:30 AM ET tomorrow. This report measures employee output and employer costs for employee wages and benefits. It is considered to be a measurement of wage inflation. It is believed that the economy can grow with low inflationary pressures when productivity is high. Last month’s preliminary reading revealed a 0.7% increase in productivity and a 0.5% increase in labor costs. Tomorrow’s update is expected to show a 0.5% increase in the productivity number and a 0.6% rise in the costs reading. I don’t think this piece of data will have much of an impact on the bond market or mortgage pricing either unless it varies greatly from expectations.

The second release of the day will come from the Commerce Department, who will post April’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 cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn’t expected to cause much of a change in rates this month. Current forecasts are calling for an increase in orders of 1.6%. A smaller increase would be favorable to the bond market and mortgage rates because it would indicate the manufacturing was not as stronger as many had thought.

Tomorrow’s final relevant report is the Federal Reserve’s Beige Book, which is named simply after the color of its cover. This report details economic conditions throughout the U.S. by Federal Reserve region. It is relied upon heavily by the Fed to determine monetary policy during their FOMC meetings. If it shows surprisingly softer economic activity since the last report, the bond market may thrive and mortgage rates could drop shortly after the 2:00 PM ET release. If it reveals signs of inflation growing or rapidly expanding economic activity in many regions, we could see mortgage rates revise higher tomorrow afternoon. It will be interesting to see if there is any correlation between this data and yesterday’s surprise decline in the ISM index.