October 8th, 2009 6:40 PM by Lehel S.
Thursday's bond market has opened flat despite early stock gains and stronger than expected unemployment data. Stocks are rallying with the Dow up 80 points and the Nasdaq up 25 points. The bond market is nearly unchanged from yesterday's close, but we will likely see an improvement in this morning's mortgage rates of approximately .125 - .250 of a discount point due to strength late yesterday.
The Labor Department reported this morning that 521,000 new claims for unemployment benefits were filed last week. This was lower than expected and the lowest total in approximately nine months. This is considered bad news for bonds, but fortunately this data is not considered to be highly important and has had little impact on this morning's mortgage rates.
Yesterday's 10-yeat Note sale actually went very well. Investor demand was strong, indicating there is still an appetite for U.S. debt. The bond market moved higher after the results were posted yes terday afternoon, but the rally fell well short of what would be expected. This could be a result of concerns about today's 30-year Bond sale, or could mean that there is strong resistance at current prices. I am thinking the latter, which is the reason for the conservative approach towards mortgage rates. Theoretically, bonds could still move higher, pushing mortgage rates lower. However, until we are able to break below current levels, I am staying on the conservative side as rates will almost always spike higher faster than they move lower.
There is no monthly or quarterly economic data scheduled for release today. Look for any swings in stock prices to affect bonds, particularly since we are heading into corporate earnings season. Today's 30-year Bond sale probably will not heavily influence mortgage rates this afternoon, but it does have the potential to cause rate changes. I believe its potential negative impact on rates is greater than its likely posi tive impact. This means that a strong sale today may lead to minor improvements to mortgage pricing this afternoon, but a weak sale could lead to a noticeable increase in rates.
Tomorrow morning brings us the only factual economic data of the week, but it is one of the least important reports we get each month. August's Goods and Services Trade Balance will give us the size of the U.S. trade deficit, but usually does not lead to significant movement in bond prices or mortgage rates. It is expected to show a $32.9 billion trade deficit.
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... Lock if my closing was taking place between 21 and 60 days... Lock 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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