November 17th, 2009 10:22 AM by Lehel S.
Tuesday's bond market opened in negative territory despite some extremely favorable economic news. The stock markets are showing relatively minor losses with the Dow down 18 points and the Nasdaq down 8 points. The bond market is currently down 3/32, which will likely keep this morning's mortgage rates close to yesterday's levels.
The Labor Department gave us the first and more important of today's two relevant economic reports. They announced that the Producer Price Index (PPI) rose 0.3% last month, falling short of expectations. However, the big news was the core data reading that fell 0.6% when it was expected to rise 0.1%. This means that inflationary pressures at the producer level of the economy were well below what analysts had thought. That is very good news for bonds and mortgage rates, but it appears that the bond market was not too impressed with this morning's news.
The second report of the morning was October's Industrial Productio n data. It showed that output at U.S. factories, mines and utilities rose only 0.1% when it was expected to rise 0.4%. This is also good news for bonds because rapid increases in manufacturing activity indicates a strengthening economy.
There are again two reports scheduled for release tomorrow. October's Consumer Price Index (CPI) will be released at 8:30 AM ET tomorrow. This index is similar to today's PPI, except it measures inflationary pressures at the more important consumer level of the economy. The overall reading is expected to show an increase of 0.2% while the core data is expected to rise 0.1%. Weaker than expected readings would be good news for bonds and mortgage rates, while larger than forecasted increases could lead to higher mortgage rates tomorrow.
Tomorrow's second report is October's Housing Starts. This data gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don' t expect this month's version to be any different unless it varies greatly from analysts' forecasts and the CPI matches expectations. It is expected to show a small increase in starts of new homes.
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.