There were two economic reports posted this morning that were relevant to the bond market and mortgage rates. At 8:30 AM ET the Commerce Department announced that new orders for durable goods fell 4.3% at U.S. factories last month. This was much weaker than the 2.1% increase that was expected. Even a secondary reading that excludes more volatile and pricey orders for transportation-related items such as new airplanes, fell well short of forecasts (-1.6% vs +0.6%). Lastly, a downward revision to November’s orders indicates that the manufacturing sector was softer than many had thought over the past two months. Due to the known volatility in this data there is somewhat of a discount given to the size of the miss, but it still was a large enough variance to positively affect bond trading and mortgage pricing this morning.
The second report of the morning was January's Consumer Confidence Index (CCI) at 10:00 AM ET. The Conference Board announced that the CCI stood at 80.7 this month, exceeding forecasts of 77.5. This means that surveyed consumers were more optimistic about their own financial and employment situations than many had thought. That makes the data negative for the bond and mortgage markets because rising confidence usually translates into higher levels of consumer spending and overall economic growth.
Tomorrow does not have any economic reports scheduled for release that are of concern to mortgage rates. However, we do have the results of the year's first FOMC meeting. The two-day meeting begins today and will adjourn at 2:00 PM ET tomorrow. It is expected to yield no change to short-term interest rates, but traders will be looking for any indication of the Fed's change in sentiment about the economy and when a potential change to short-term rates will be made or when the next reduction in their current stimulus programs (QE3) will take place. This will also be current Fed Chairman Bernanke’s last FOMC meeting as chairman with current Vice Chair Janet Yellen taking over as Chairman Feb. 1st, although that shouldn't affect this meeting’s results. There is a decent possibility of seeing afternoon volatility in the markets tomorrow due to the 2:00 PM ET post-meeting statement.
If you are a gambler then float your rate, but all others I would advice to take advantage of the rates at their current levels and lock. Take advantage of our float down option if rates trend downwards. Its a win-win.
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