December 11th, 2009 11:32 AM by Lehel S.
Friday's bond market has opened in negative territory following the release of much stronger than expected economic data. The stock markets have reacted fairly positive to the news with the Dow up 57 points and the Nasdaq up 6 points. The bond market is currently down 17/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point.
This morning big news was November's Retail Sales report that showed a whopping 1.3% spike in sales. This was more than twice the latest forecast of a 0.6% jump. Also, if volatile auto-related sales are excluded, sales rose 1.2%. This reading is triple the forecast of a 0.4% increase, indicating that consumers spent much more last month than many had thought. That is bad news for bonds because consumer spending makes up two-thirds of the U.S. economy. If consumer spending is rapidly growing, fuel is being added to the overall economy. Generally speaking, weaker economic conditions create a more favorable environment for bonds and mortgage rates.
The second report of the day also gave us much stronger than expected results. The University of Michigan posted their Index of Consumer Sentiment for December late this morning. They announced a reading of 73.4 that exceeded forecasts of a 68.9 reading. This means that surveyed consumers were more optimistic about their own financial situations than was expected. That is not favorable news for bonds because consumers tend to spend more when they are more comfortable with their own finances. This leads to higher levels of spending and helps the economy to grow.
Following suit of Wednesday's 10-year auction, yesterday's 30-year Bond sale also was weak. Several measurements of how successful the sale goes gave us poor results. This means that investors may be losing interest in acquiring new U.S. debt. That could be a problem for mortgage rates if it continues.
Next week i s pretty busy in terms of economic releases and related events. There is nothing of importance scheduled for Monday, but the rest of the week brings us data that includes two key inflation readings and the last FOMC meeting of the year. It will likely be another active week for mortgage rates, but look for details on next week's event sin Sunday's weekly preview.
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.