November 2nd, 2009 2:56 PM by Lehel S.
Monday's bond market has opened in negative territory due to early stock strength and stronger than expected economic news. The stock markets are starting the week with sizable gains. The Dow is currently up 104 points while the Nasdaq is showing a 15 point gain. The bond market is currently down 6/32, but we will likely see little change to this morning's mortgage rates due to strength late Friday.
Today's only relevant economic data came from the Institute for Supply Management (ISM), who said that their manufacturing index stood at 55.7. This was higher than the 53.0 that was forecasted and its highest reading since April 2006. This indicates that manufacturer sentiment about business conditions improved more than thought, hinting at manufacturing sector strength. That is bad news for bonds and mortgage rates because a strengthening manufacturing sector makes broader economic growth more likely.
The rest of the week brings us three more re levant economic reports and another FOMC meeting. The next is tomorrow's release of September's Factory Orders report. This report is similar to last week's Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show 0.9% increase in new orders from August's level. A smaller than forecasted increase would be good news for the bond market and mortgage rates while a larger than expected rise is bad news and should push rates higher tomorrow.
There is no important data scheduled for release Wednesday. However, this week's FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. There is almost no possibility of the Fed raising key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of when the Fed may make a move. The meeting will adjourn at 2:15 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours. Generally speaking, any hint of a rate increase coming relatively soon would be negative news for bonds and lead to higher mortgage rates.
Overall, the single most important day will likely be Friday but tomorrow's FOMC meeting could significantly move the markets and mortgage also. I believe stocks will continue to experience volatility that will also impact bond trading. The key to the week will be Friday's employment numbers, but any significant swings in the stock markets may also influence whether mortgage rates close the week higher or lower than this morning's levels.
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... 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.