July 11th, 2008 12:29 PM by Lehel Szucs
Friday's bond market has opened well in negative territory despite significant stock losses. The major stock indexes are falling as investors fear that mortgage giants Fannie Mae and Freddie Mac are on the brink of collapse, renewing housing and credit concerns. The Dow is currently down 199 points while the Nasdaq has fallen 35 points. The bond market is currently down 18/32, but this morning's mortgage rates will likely show little change following yesterday's closing activity.
Neither of today's economic reports were that important to the markets. The first of the two showed that the U.S. trade deficit fell to $59.8 billion in May when it was expected to rise. The University of Michigan Index of Consumer sentiment for July came in at 56.6. This was a slight increase from June's final reading when it was expected to fall nearly a point. That means that consumers were more optimistic about their own financial situation than many had thought, which is considered a negative for bonds and mortgage rates.
Despite the difference between forecasts and actual results, this morning's economic data really has played little part in the market's direction today. Concerns that the government may need to take over or bail out Fannie and Freddie is the source of today's volatility. It's hard to say whether this will end up being a positive or negative for mortgage rates. But it is a fairly safe bet that we will see plenty of volatility in the markets are public comments made, news releases are posted and the almighty rumor mill kicks into high gear. Accordingly, be careful if still floating an interest rate.
Next week brings us plenty of important economic news for the markets to digest. Some of the key reports will give us inflation readings at the producer and consumer level of the economy and retail level sales from last month, along with the minutes from the last FOMC meeting. However, none of these rel eases come until the middle and latter part of the week so I am expecting the stock markets and related news to be a major influence on bond trading and mortgage rates the first couple of days. Look for more details on next week's events in Sunday's weekly preview.
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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