October 23rd, 2008 2:53 PM by Lehel Szucs
Thursday's bond market opened flat but has since slipped into negative ground following early gains in stocks. The stock markets are rebounding from yesterday's afternoon sell off that pushed the Dow down over 500 points and the Nasdaq down 80 points. I suspect that this morning's rally may be short-lived so we should be looking for afternoon volatility again.
The Dow is currently up 180 points while the Nasdaq has gain 13 points. The bond market is currently down 5/32, which will likely push this morning's mortgage rates higher by approximately .125 - .250 of a discount point. If the stock markets due give back their current gains, we may see improvements to mortgage rates later in the day.
The only economic news released this morning was last week's initial unemployment claims from the Labor Department. They reported that new claims rose to 478,000 last week, which was an increase of approximately 15,000. Analysts were expecting to see lit tle change form the previous week, meaning that the employment sector is still showing signs of weakness. This is good news for bonds, but this particular report is not considered to be of high importance because it tracks only a week's worth of claims.
Tomorrow morning brings us the release of September's Existing Home Sales data from the National Association of Realtors. This report gives us an indication of housing sector strength and mortgage credit demand. I don't see it having much of an influence on the bond market or mortgage rates, but a reading that varies greatly from analysts' forecasts could lead to a slight change in mortgage pricing. It is expected to show a slight increase in sales from August to September.
The recent rapid improvement in bonds has me concerned that we may see profit taking by traders that could push prices lower and mortgage rates higher. It appears that there is no consensus in the markets regarding whether or not th is is the bottom for the stock markets. It appears there is still room for the major indexes to fall further, but this may not necessarily mean that rates will improve as a result. That means that the risk versus reward factor of continuing to float an interest rate is leaning heavily to the risk side in my opinion. Accordingly, please maintain constant contact with your mortgage professional if you have not locked an interest rate yet.
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.
©Mortgage Commentary 2008