January 20th, 2010 11:15 AM by Lehel S.
Wednesday's bond market has opened in positive territory following the release of favorable economic data and early selling in stocks. The stock markets are reacting to some disappointing earnings results and the same economic data that is fueling the early buying bonds. The Dow is currently down 175 points while the Nasdaq has lost 40 points. The bond market is currently up 10/32, which will likely improve this morning's mortgage rates by approximately .125 of a discount point.
The Labor Department reported this morning that December's Producer Price Index (PPI) rose 0.2%. This exceeded forecasts since no change was expected, meaning prices paid at the producer level of the economy rose a little more than thought. Because rising prices equates to inflation that hurts bond prices, this could have been considered negative news for bonds. However, the much more important core data reading that excludes volatile food and energy prices was unchanged from Nove mber's level. It was expected to rise 0.1%, making this good news for bonds and mortgage rates.
The Commerce Department gave us December's Housing Starts this morning also. They announced a much smaller number of new housing starts than analysts were expecting. This indicates that the housing sector was not as well as thought. Unfortunately, this data is not considered to be of high importance to the markets and has had little impact on this morning's mortgage rates.
Tomorrow morning brings us the release of December's Leading Economic Indicators (LEI). This late morning release will attempt to measure economic activity over the next three to six months. It is considered to be of moderate importance to the bond and mortgage markets. Analysts are currently expecting to see an increase of 0.7%, meaning that economic growth over the next few months should rise fairly rapidly. A smaller than expected increase would be good news for the bond market and mortgage rates, but a larger than expected rise could lead to bond selling and a minor increase to mortgage pricing tomorrow.
Also tomorrow morning is the weekly unemployment update from the Labor Department. They are expected to say that 440,000 new claims for unemployment benefits were filed last week. That would be a small decline from the previous week. Generally speaking, the larger the sum of new claims, the better the news for bonds. However, since this data only tracks a single week's worth or new claims, its impact on mortgage rates is usually minimal.
If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float 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 opini on and cannot be guaranteed to be in the best interest of all/any other borrowers.