Daily Rate Lock Advisory

Indexes Affecting Rate Lock

Medium

Unknown

Factory Orders

October's Factory Orders report will start this week's calendar late tomorrow morning. This Commerce Department report is similar to the recently released Durable Goods Orders report, except this one includes new orders for both durable and non-durable goods. It usually doesn't have a significant influence on bond trading since a good portion of the data has previously been made public. Analysts are expecting to see a 2.6% decline in new orders. Favorable news would be a larger decline because it would signal softer than expected manufacturing sector activity.

Medium

Unknown

ISM Service Index

Tuesday’s sole report is November’s non-manufacturing index from the Institute for Supply Management (ISM). This is the sister release to last week’s manufacturing index, tracking executive sentiment about business conditions in the services sector instead of manufacturing. It is expected to show a reading of 52.4, up from October’s 51.8, signaling more surveyed executives felt business improved in the sector than did in October. As a sign of economic strength, an increase would be bad news for bonds and mortgage rates. Good news would be a much lower reading that would allow bond prices to rise and mortgage rates to move lower.

Medium

Unknown

ADP Employment

Wednesday begins with the release of November's ADP Employment report at 8:15 AM ET that tracks changes in private-sector jobs, using the company's payroll processing clients as a base. 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 markets are expecting to see 127,000 new private-sector payrolls last month. A much smaller number would be considered good news for mortgage rates.

Low

Unknown

Productivity and Costs (Quarterly)

Next will be revised 3rd Quarter Productivity numbers at 8:30 AM ET Wednesday. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn't necessarily bad for bonds. It is the conditions surrounding an expanding economy, such as rising inflation, that hurt bond prices and mortgage rates. Current forecasts show a 4.8% rise in productivity, up slightly from the initial estimate. The stronger the reading, the better the news for the bond market. This report generally does not have a noticeable impact on mortgage pricing though, so it will take a wide variance to draw much attention.

High

Unknown

Employment Situation

November's extremely influential Employment report will be released at 8:30 AM ET Friday, giving us the U.S. unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. They are expected to reveal the unemployment rate held at 3.9% while 175,000 new jobs were added to the economy. The income reading is forecasted to show an increase of 0.3%. The ideal scenario for mortgage shoppers would be a higher unemployment rate, a much smaller increase in payrolls (or a decline) and no change in the earnings reading. Those types of numbers should cause bond prices to rise and mortgage rates to move noticeably lower Friday. However, stronger than expected readings may fuel bond selling that would lead to higher mortgage rates.

Medium

Unknown

Univ of Mich Consumer Sentiment (Prelim)

The final report of the week is the release of December's preliminary reading to the University of Michigan's Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates if it shows a sizable miss from forecasts. Consumer sentiment or confidence is tracked because the more comfortable consumers are about their own financial situations, the more likely they are to make a large purchase in the near future. Since consumer spending makes up such a large part of our economy, any related data is watched closely. Friday's release is expected to show a reading of 62.6, which would be an increase from last month's final reading of 61.3. A large decline in confidence would be favorable news for rates.

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Unknown

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Overall, Friday is the most important day of the week due to the significance of the Employment report. Tuesday and Wednesday may also be active days. Thursday is the best choice for calmest day unless something unexpected happens. With so much scheduled this week after such a strong November rally in bonds it would be prudent to keep an eye on the markets if still floating and closing in the near future.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

Factory Orders

ISM Service Index

ADP Employment

Productivity and Costs (Quarterly)

Employment Situation

Univ of Mich Consumer Sentiment (Prelim)

none

Float / Lock Recommendation