November 30th, 2009 9:18 AM by Lehel S.
Monday's bond market has opened in negative territory, unable to extend Friday's rally. The stock markets are relatively calm with the Dow up a few points and the Nasdaq down a few points. The bond market is currently down 8/32, which may minimize the expected improvements in this morning's mortgage rates. However, I am still expecting to see a small improvement in this morning's mortgage rates compared to Wednesday's pricing.
There are five pieces of economic news that may affect mortgage rates this week, with data scheduled for release each day except today. The fact that the bond market was unable to follow-thru on Friday's rally concerns me that we may have some resistance in breaking current levels in the bond market. That shifts the risk versus reward calculations for locking or floating a rate, at least short-term. This doesn't necessarily mean that I feel rates will move higher in the immediate future. It simply means that the risk of floating a rate outweighs the potential gain of doing so. With little possible reward, why take the risk?
The Institute for Supply Management (ISM) will post their manufacturing index for November late tomorrow morning. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for a decline in sentiment from October to November. October's reading was previously announced as 55.7. A weaker reading than the expected 54.8 would be good news for the bond market and mortgage rates. A reading below 50 means that more surveyed trade executives felt business worsened during the month than those who felt it had improved. The lower the reading the better the news for bonds because waning sentiment indicates a slowing manufacturing sector and makes a broader economic recovery less likely.
Overall, the most important day this week is Friday with monthly employment figures being released, but we may also see sizable movement in rates tomorrow. If Friday's Employment report reveals stronger than expected results we may see rates spike higher that morning, possibly erasing any gains during the week. It will probably be the key to rates moving lower or higher for the week. I suspect it will be a fairly active week for the markets and mortgage pricing, so it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.
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.
©Mortgage Commentary 2009