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Our Weekly Mortgage Market Commentary

April 3rd, 2017

This week brings us the release of only four pieces of monthly economic data in addition to the minutes from last month's FOMC meeting. Despite the small number of economic reports, we still should have a very active week for mortgage rates because two of them are considered to be highly important to the markets.

The week kicks off late Monday morning with one of those highly important releases. That is when the Institute for Supply Management (ISM) will post their manufacturing index for March. This index gives us an important measurement of manufacturer sentiment by surveying manufacturing executives. It is the first piece of data that we see each month that covers the preceding month. In other words, it is the freshest economic data each month. A reading above 50 means more surveyed executives felt business improved during the month than those who said it had worsened. This month’s report is expected to show a reading of 57.0, which would be a decline from February’s reading of 57.7. This means that analysts think business sentiment softened from February's level. That would be relatively good news for the bond market and mortgage rates because rising confidence means a stronger manufacturing sector. The higher the reading, the worse news it is for bonds and mortgage rates.

February’s Factory Orders will be released late Tuesday morning. This data is similar to the Durable Goods Orders report, except it includes orders for both durable and non-durable goods. It will give us another measurement of manufacturing sector strength. This report is considered to be only moderately important to the bond and mortgage markets, so unless it varies greatly from forecasts of a 0.9% increase, I suspect that the data will have a minimal impact on Tuesday’s mortgage rates.

The ADP Employment report is set for release early Wednesday morning, which has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. This report tracks changes in private-sector jobs of ADP’s clients that use them for payroll processing. 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 accurate in predicting results of the monthly government report that usually follows a couple days later. Still, because we could see at least a moderate reaction to the results, we will be watching it. Analysts are expecting it to show that 175,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.

Wednesday afternoon is when the minutes from the last FOMC meeting will be released. Market participants will be looking at them closely as they give us insight to the Fed’s current thought process and individual Fed member opinions. Any surprises in the 2:00 PM ET release, particularly about inflation, economic conditions or when the next rate hike will take place, could cause afternoon volatility in the markets Wednesday and possible changes in mortgage pricing.

The biggest news of the week will come early Friday morning when the Labor Department posts March’s Employment report, revealing the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate remained at 4.7% and that approximately 178,000 payrolls were added to the economy during the month while earnings rose 0.3%. A higher unemployment rate and a much smaller than expected payroll number would be good news for bonds and could likely push mortgage rates lower Friday morning because it would indicate weaker than thought conditions in the employment sector of the economy.

Overall, Friday is the most important day of the week due to the Employment report, but we could also see Monday be pretty active. The calmest day for mortgage rates will probably be Tuesday or Thursday. With such highly influential data scheduled this week, it is strongly recommended that you maintain contact with your mortgage professional if closing in the near future and still floating an interest rate.

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