December 11th, 2008 10:11 AM by Lehel Szucs
Thursday's bond market has opened in positive territory following weaker than expected numbers in some minor economic reports and a fairly uneventful morning in stocks. The stock markets are flat with the Dow currently nearly unchanged and the Nasdaq down 6 points. The bond market is currently up 11/32, which will likely improve this morning's mortgage rates by approximately .375 of a discount point.
Neither of today's reports are considered to be market movers, so their results have had little impact on this morning's mortgage pricing. The first was October's Goods and Services Trade Balance report that showed a trade deficit of $57.2 billion. This was much larger than the $53.5 billion deficit that was expected. However, we have not seen this news affect trading or mortgage rates today.
The second was last week's unemployment claims figures by the Labor Department. They reported that 573,000 new claims for benefits were filed last week, grea tly exceeding forecasts. This is also a 26 year high for new claims, meaning that the employment sector may still be weakening. This is generally good news for bonds and mortgage rates, but since the data tracks only a week's worth of claims it usually does not heavily influence the markets.
Also worth mentioning is the 10-year Treasury Note auction today that may hurt or help boost bond prices, depending on how strong of a demand there is in the sale. Results will be posted at 1:00 PM ET. If there was a strong demand for the sale, we may see bonds move higher and mortgage rates revise lower during afternoon trading. However, a lackluster interest could lead to higher mortgage pricing.
Tomorrow morning brings us the release lf November's Retail Sales report. This data is very important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts call for it to show a 2.0% decline in sales from October's levels. If it reveals weaker than expected sales, the bond market should thrive and mortgage rates should fall as a result. A stronger than expected reading could fuel stock market gains and push mortgage rates higher tomorrow morning.
Also tomorrow and just as important as the sales data, the Labor Department will release November's Producer Price Index (PPI). This index measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If tomorrow's release reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and should drive mortgage rates higher. If we see in-line or weaker tha n expected numbers, the bond market should fair well and mortgage rates should fall. Current forecasts are showing a 2.0% drop in the overall index and a 0.1% rise in the core data.
The fourth and final report of the week is December's preliminary reading to the University of Michigan's Index of Consumer Sentiment late tomorrow morning. 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 Sales and PPI reports out before this data, I don't expect it to affect mortgage rates much. It is expected to show a reading of 55.0, which would be a small decline 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... Lock if my closing was taking place between 21 and 60 days... Lock if my c losing 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.
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