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The Weekly Mortgage Market Commentary

March 6th, 2017

This week has only four pieces of monthly and quarterly economic data scheduled for release that may influence mortgage rates. One of those reports is extremely important to the financial and mortgage markets. In addition to that data, we also have two Treasury auctions that have the potential to move rates.

The week's calendar kicks off Monday with the release of January’s Factory Orders at 10:00 AM ET. This report will give us a measurement of manufacturing sector strength by tracking new orders at U.S. factories for both durable and non-durable goods. Current forecasts are calling for an increase in new orders of approximately 1.0%. A decline in new orders would be good news for the bond market and could lead to an improvement in mortgage rates since it would point towards economic weakness.

Tuesday has nothing of importance scheduled for release. Wednesday has two early morning releases that we will be watching though. The first comes at 8:15 AM ET from payroll processor ADP who will announce their change in private-sector payrolls processed last month. Since it is not a government agency report, it isn’t considered to be highly important. However, as with any employment-related data, it does draw some attention. This is especially true for this report because it is posted just a couple days before monthly employment figures are released by the Labor Department. I personally believe it is given more attention than it really deserves, particularly because many use it to predict the monthly government figures but often without success. Still, if it shows a noticeable variance from expectations, it will likely cause movement in the markets and mortgage rates. Forecasts are calling for it to show 180,000 new payrolls.

The second report of the day will be the revised Productivity index for the 4th Quarter of last year. The preliminary reading posted last month showed an increase of 1.3% in worker output. Analysts are expecting to see an upward revision of 0.2% to last month’s initial reading. Employee productivity is watched fairly closely because a higher level of output per hour is believed to mean that the economy can expand without inflation concerns. However, since this data is quite aged now, it likely will have little impact on Wednesday’s mortgage rates unless it shows a significant change.

There are two Treasury auctions this week that could potentially affect mortgage rates. The first is the 10-year Treasury Note auction Wednesday and the 30-year bond sale will be held Thursday. Results of both sales will be posted at 1:00 PM ET on the sale days. If investor demand was high, we may see bonds rally during afternoon trading as it would hint that investors still have an appetite for longer-term securities. However, weak demand in the sales could lead to selling and an increase in mortgage rates late Wednesday and/or Thursday.

The biggest news of the week comes early 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 much smaller increase in payrolls than expected and little or no increase in earnings. Current forecasts are calling for a 0.1% decline in the unemployment rate from January's 4.8% and approximately 188,000 new jobs added to the economy. Stronger than expected readings will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would raise concerns about the economy’s ability to continue to grow that would have an opposite impact on the markets and mortgage pricing.

Overall, Friday is the most important day of the week due to the release of the monthly Employment report.Wednesday could also be pretty active for mortgage rates. The calmest day will probably be Tuesday unless stocks make a noticeable move either direction. Despite the lack of a high number of economic releases, we still should see a good amount of movement in mortgage rates over the next five days. Therefore, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

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