December 17th, 2008 10:16 AM by Lehel Szucs
Wednesday's bond market has opened up sharply as investors continue yesterday's late rally. The stock markets are showing losses with the Dow down 114 points and the Nasdaq down 20 points. The bond market is currently up 45/32, which will likely improve this morning's mortgage rates nearly a full percentage point in rate compared to yesterday's morning rates.
Yesterday's FOMC meeting yielded a .750 cut to key short-term interest rates to bring the Fed Funds rate down to a record low of .250%. That, along with the post meeting statement, led to a huge rally in bonds and stocks late yesterday. While the stock markets are giving back some of those gains, bonds have built on top of them. However, it is difficult to see where bonds may be able to improve much more before pulling back. Accordingly, I would proceed cautiously if you have not locked and interest rate yet.
There is no relevant economic news scheduled for release today, so there is no data to drive bonds prices higher than current levels. With stocks in negative ground, bonds may appear more attractive to investors, at least short-term. But, I would not be surprised to see some profit-taking in bonds to capture the gains from the recent rally. If this is the case, we may see mortgage rates revise a little higher during afternoon trading.
Tomorrow morning brings us the release of weekly unemployment figures from the Labor Department. This data is not usually of much importance to the markets because it tracks only a week's worth of new claims. However, the second report of the day is only moderately important so if this data varies greatly from forecasts it could influence bonds enough to affect mortgage pricing. It is expected to show that 558,000 new claims for benefits were filed last week.
The week's last piece of economic news will be posted tomorrow morning with the release of the Conference Board's Leading Economic Indicat ors (LEI) for the month of November. This 10:00 AM release attempts to measure economic activity over the next three to six months. It is expected to show a sizable decline in activity, meaning that it predicts slower economic activity over the next several months. This probably will not have much of an impact on bond prices or affect mortgage rates unless it exceeds current forecasts of a 0.5% decline from October's reading. If it shows a larger decline, the bond market may move slightly higher, improving mortgage rates slightly.
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... 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 int erest of all/any other borrowers.
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