November 27th, 2009 9:03 AM by Lehel S.
Friday's bond market has opened in positive territory due significant selling on stocks during early trading. The stock markets are posting sizable losses with the Dow down 152 points and the Nasdaq down 35 points. The bond market is currently up 11/32, but I am expecting to see little change in mortgage rates since many lenders are closed or will reflect today's news in Monday's pricing.
Despite the current losses in stocks, the Dow and Nasdaq are both well off earlier lows. The Dow had fallen as much as 233 points while the Nasdaq was down by as much as 62 points. This morning's weakness in stocks came from overseas news that Dubai may not be able to pay debt payments that are coming due. This has rattled several international markets as it brought back fears about economic stability.
The selling in stocks has helped boost bond prices this morning as investors seek safe-haven from the volatility. But this may be just a knee-jerk reaction and short-lived as we have already seen the major stock indexes recover a good portion of earlier losses. Therefore, I would not consider this to be a breakthrough morning for bonds or mortgage rates. With many traders at home for the holiday weekend, the early reaction to the news may be more a result of thin trading than the significance that the news will actually have on our economy and markets. In other words, lets wait until Monday's full day of trading to see just how much of an impact this will have on our markets and mortgage pricing.
Wednesday's 7-year Note auction went pretty well, meaning there still is an appetite for U.S. debt. This is needed if we want mortgage rates to fall below current levels. The 10-year Note sale, which is a better indication of investor interest in longer-term securities such as mortgage-related bonds, will be held the week after next. That sale will give us an important measurement of appetite for mortgage-related debt that could push mortgage rates noticeably lower than current levels.
The stock markets will close at 1:00 PM ET today while the bond market will close at 2:00 PM. With many lenders closed today or on a skeleton staff, I don't think we will see much change in mortgage rates despite today's market volatility. However, we can expect a downward change in Monday's morning pricing if the markets hold current levels.
Next brings us the release of several important economic reports. There is relevant data being posted each day except Monday. Some of the key reports are the ISM Manufacturing index and November's Employment report. Look for more details on next week's event in Sunday's weekly preview.
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.