December 10th, 2009 9:54 AM by Lehel S.
Thursday's bond market has opened well in negative territory following yesterday's weak Treasury auction. The stock markets are showing gains with the Dow up 79 points and the Nasdaq up 14 points. The bond market is currently down 16/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point.
This morning's economic news wasn't important enough to heavily influence bond trading, but it has contributed somewhat to the early selling. October's Goods and Services Trade Balance report showed that the U.S. trade deficit stood at a smaller than expected $32.9 billion. This data doesn't usually directly affect bond trading, but it does influence the value of the U.S. dollar versus other currencies. A strong dollar makes U.S. securities, including mortgage-related bonds, more attractive to international investors. But today's release was the week's least important and has not had an impact on mortgage rates.
The Labor Department gave us some favorable news with an announcement that 474,000 new claims for unemployment benefits were filed last week. This was a higher total than was expected, but this data is not important enough to erase the negative tone in bonds since yesterday's auction results were posted.
As mentioned already, yesterday's 10-year Note sale did not go very well. This means that investor appetite for longer-term U.S. debt was not as strong as hoped for. This also indicates that mortgage bonds, which are considered long-term securities, may see some pressure in the near future due to a lack of buyer interest. If that is true, we can expect to see mortgage rates rise in the near future. Today's 30-year Bond sale is not as important as yesterday's sale was, but if we do get a strong demand from investors bond prices could rise during afternoon trading. That may lead to afternoon improvements, but I am not too optimistic it will happen today.
November's Retail Sales report will be released early tomorrow morning. This is one of the more important reports released each month since it tracks consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so any related data is watched closely. It is expected to show a 0.6% increase in sales at retail level establishments, meaning consumer spending was stronger in November than in October. Since the market is expecting an increase, it will likely take a larger than expected jump in sales for the bond market to react negatively and mortgage rates to rise. A smaller than expected increase should lead to lower mortgage rates tomorrow.
Also tomorrow is the release of December's preliminary reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly. However, with the Retail S ales data report before this data, I don't expect it to affect mortgage rates much. It is expected to show a reading of 68.9, which would be an increase from last month's final reading.
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.