November 23rd, 2009 9:48 AM by Lehel S.
Monday's bond market has opened in negative territory following stronger than expected economic data and a sizable rally in stocks. The stock markets are starting the week with strong gains with the Dow up 149 points and the Nasdaq up 36 points. The bond market is currently down 5/32, but I am not expecting to see much change in this morning's mortgage rates.
The National Association of Realtors reported late this morning that sales of existing homes rose over 10% last month, greatly exceeding analysts' forecasts. This fuels the theory that the housing sector is strengthening, which is thought by many to be needed for a broader economic recovery. Therefore, this data can be considered bad news for bonds and mortgage rates, but this was one of the week's least important reports so its impact on rates has been minimal.
Tomorrow morning brings us the first revision to the 3rd Quarter Gross Domestic Product (GDP). The GDP revision is expected to sho w a downward revision from last month's preliminary reading of a 3.5% annual rate of expansion. Current forecasts call for a reading of approximately 2.9%, meaning that there was less economic growth during the third quarter than previously thought. This would be good news for the bond market and mortgage rates, but it will likely take a smaller than expected reading for this report to improve mortgage rates.
November's Consumer Confidence Index (CCI) will also be released tomorrow morning, but during late morning trading. It gives us a measurement of consumer willingness to spend. If consumer confidence is rising, analysts believe that consumers are more apt to make larger purchases, essentially fueling economic growth. This raises inflation concerns and usually pushes mortgage rates higher. Analysts are expecting to see little change from last month's 47.7 reading, meaning consumer were just as concerned about their own financial situations as they were last mo nth. A weaker than expected reading should be good news for mortgage rates, but a stronger than expected reading could push mortgage rates higher tomorrow.
Also worth noting about tomorrow is the release of the minutes from the last FOMC meeting and the 5-year Treasury Note auction. Both are afternoon events and both have the potential to heavily influence the bond market or be a non-factor. The results of auction will be posted at 1:00 PM ET. If there was a strong demand from investors, we could see bond prices rise and mortgage rates fall during afternoon hours. But a lackluster interest in the sale could lead to higher mortgage pricing.
The FOMC minutes may be a major mover of the markets or a non-factor, depending on what they say. The key will be concerns over inflation and the Fed's next move. If the Fed members were concerned about inflationary pressures and overly optimistic about economic growth, we may see the bond ma rket move lower and mortgage rates higher tomorrow afternoon. However, if they indicate a likelihood of another rate cut in the coming months, we should see the bond market rise and mortgage rates drop during afternoon trading.
Overall, I believe that it is going to be an active week for the mortgage market, particularly the first half. Friday will be the least important day of the week and either tomorrow or Wednesday will be the most important. I expect to see plenty of movement in rates the first couple of days, possibly afternoon revisions also, so please be careful and maintain 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... 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 opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.