Mortgage Rates Move on Better News, September 30, 2010

The markets and in-tun, mortgage rates respond to new economic data.  Good news for the economy is typically bad for mortgage rates and vice versa.  With two key economic reports released today signaling better than expected news, rates are headed up.

Mortgage Rate Trend Direction:     Up

Economic Reports/Rate Impact:    Final GDP, 8:30 AM ET, High Rate Impact

                                                              Weekly Jobless Claims, 8:30 AM ET, High Rate Impact

                                                              Chicagp PMI, 9:45 AM ET, Moderate Rate Impact

Key News:                                            Irish Bank Bailout, China/US Relations

Summary

Economic data is the fuel of the markets and today gives the market plenty of energy to move.  Two key indicators of economic growth and one slightly less impactful report will be released this morning prior to initial loan pricing.  Based on the results of this data I expect mortgage rates to rise from yesterday's closing position this morning.

Impact of economic reports

Final GDP for the 2nd quarter of 2010 was revised up as consumer spending showed an increase.  This does not show significant strength in the economy, yet it does show signs of stabilization.  This reduces fear of recession and will tend to push rates higher.

Jobless Claims are one of the weekly guideposts of our economic condition in almost real-time.  While this measure is not a perfect measure, it does tend to give us an idea of the direction of change in employment.  This week initial claims for unemployment fell again, demonstrating a clear trend toward improvement, albeit very slow improvement.

The Chicago Purchase Mangers Index is a measure of the activity in the manufacturing sector in the Chicago Federal Reserve Region, a region with a particularly high concentration of manufacturing.  Today's report provided evidence that the manufacturing sector in this key region has strengthened over the past month.  

Three reports today--three positive reads on the economy.  Mortgage rates are likely moving upward quickly this morning.

Impact of international of political events

The Irish government reached agreement on a plan to support trouble bank, Anglo Irish.  The support will push Ireland's debt to 32% of GDP, a high number, but not as bad as some analysts had feared.

Elsewhere, relations between China and the US remain rocky as China has indicated that recent statments and actions to pressure them to raise the value of their currency would "harm" the relationship between the countries.  For his part, President Obama has signaled that he is not likely to support a bill recently considered in Congress to penalize China if Yuan values do not rise sufficiently.