December 14th, 2009 10:12 AM by Lehel S.
Monday's bond market has opened in positive territory despite early gains in stocks. The stock markets are reacting favorably to both international (Dubai World) and domestic (Citi) news that eased some concerns in the market. The result is the Dow up 28 points while the Nasdaq has gained 14 points. The bond market is currently up 3/32, which should improve this morning's mortgage rates by approximately .125 of a discount point over Friday's rates.
There is no relevant economic data scheduled for release today, but the rest of the week brings us several reports and events that are likely to cause movement in mortgage rates. Besides the five relevant economic reports that will be posted between tomorrow and Thursday morning, there also is another Federal Open Market Committee (FOMC) meeting to watch. Two of the five economic reports are considered to be of high importance, so the data should have a heavy influence on the markets and mortgage rates this week .
The first relevant report of the week is one of the two highly important ones. The Labor Department will release November's Producer Price Index (PPI) early tomorrow morning. 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 drive mortgage rates higher. If we see in-line or weaker than expected numbers, the bond market should fair well and mortgage rates should fall. Current forecasts are showing a 0.8% increase in the overall index and a 0.2% rise in the core data.
November's Industrial Production data is also scheduled to be posted tomorrow morning, but a little later than the PPI. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting it to show a 0.5% increase in output. A smaller than expected rise would be good news for bonds, while a stronger than expected reading may result in slightly higher mortgage pricing. However, the PPI release is more important to the markets than this data is.
Overall, expect to see a pretty volatile week in the financial markets and mortgage pricing. The most important day of the week is certainly Wednesday with the CPI and the FOMC meeting both scheduled. However, we may see noticeable movement in rates tomorrow also. Please maintain contact with your mortgage professional if you have not locked an interest rate yet because we may see sizable changes to mortgage pricing more than one day this week.
If I were considering financing/refinancing a home, I would.... Lock if my clo sing 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.