July 15th, 2008 12:49 PM by Lehel Szucs
Monday's bond market has opened in positive territory following early stock losses. The stock markets are kicking the week off with the Dow down 72 points and the Nasdaq down 8 points. The bond market is currently up 16/32, but we will likely still see an increase in mortgage rates of approximately .250 of a discount point as investors digest the news of the Fed supporting Fannie Mae and Freddie Mac.
This week brings us the release of six important economic reports for the bond market to digest. Several of these reports are considered to be of high importance, meaning we will likely see volatility in the financial markets and mortgage pricing over the next several days. There are also plenty of corporate earnings releases scheduled for the stock markets this week along with the minutes from the last FOMC meeting. Throw in a couple of days of Fed testimony and we have the makings for a very interesting week.
The first piece of data comes tomorrow mo rning with the release of June's Producer Price Index (PPI). The PPI is very important because it measures inflationary pressures at the producer level of the economy. It is expected to show a 1.3% increase in the overall reading and a 0.3% rise in the core data reading. The bond market should react quite favorably to weaker than expected readings, but a bigger than expected jump in the core reading could send mortgage rates higher tomorrow.
June's Retail Sales report will also be posted tomorrow. The Commerce Department is expected to say that sales at retail establishments rose 0.3% last month. This data is considered to be of high importance because it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so any related data is watched closely. A smaller than expected increase in sales could help fuel a bond rally and lead to lower mortgage rates, depending on the results of the PPI report.
Fed Chairman Bernanke will speak before the Senate Banking Committee tomorrow morning and the House Financial Services Committee Wednesday morning at 10:00am ET. His testimony will be broadcasted and will be watched very closely. Analysts and traders will be looking for the status of the economy and his expectations of future growth, particularly inflation concerns. This should create a great deal of volatility in the markets during the testimony and the question and answer session that follows. If he indicates that inflation is still a point of concern, we will likely see the bond market tank and mortgage rates rise.
Overall though, I think we will see the most movement in mortgage pricing this week tomorrow or Wednesday due to the release of the inflation related indexes and Mr. Bernanke's testimony those days. It will likely be an active week for mortgage rates with a fair amount of volatility, so please maintain contact with your mortgage professional if still floating an interest ra te.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
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