December 21st, 2009 9:34 AM by Lehel S.
Monday's bond market has opened down sharply following early stock gains that has shifted funds away from the bond market. The stock markets are rallying with the Dow up 120 points and the Nasdaq up 24 points. The bond market is currently down 27/32, which will likely push this morning's mortgage rates higher by approximately .750 of a discount point compared to Friday's morning rates. Most of this increase comes this morning, but some of it came from weakness late Friday.
There is no relevant economic news scheduled for release today. As expected, the stock markets are driving bond trading and this morning's mortgage pricing. The early interest in stocks has caused bond selling and moving funds into stocks where better returns are possible. The result is higher mortgage rates this morning.
This holiday-shortened trading week brings us the release of six monthly or quarterly economic reports. Only a couple of the reports being released are con sidered to be of high importance to the markets. With the Christmas holiday falling during the week we can expect very thin trading, meaning that we may see a larger reaction than normal to some news because there will be fewer traders working and less transactions being made. This will become more evident as the week progresses.
Tomorrow has two reports scheduled for release. The first is the final revision to the 3rd Quarter GDP. I don't think this data will have an impact on mortgage rates unless it varies greatly from its expected reading. Last month's first revision showed that the economy expanded at a 2.8% annual pace during the quarter and this month's revision is expected to show the same. A significant upward revision would be considered bad news for bonds, but since this data is quite aged at this point I don't think it will have much of an impact on mortgage rates tomorrow.
The second report of the day is November's Existing Home Sales repo rt. This release will come from the National Association of Realtors while Wednesday's New Home Sales data is a Commerce Department report. Both give us a measurement of housing sector strength and mortgage credit demand, however, neither are considered to be of high importance. And both of the reports are expected to show a small increase in sales. Weaker than expected readings would be considered positive for bonds and mortgage rates because they hint at a weakening housing market, but unless the actual reading varies greatly from forecasts the results will probably have little or no impact on mortgage rates.
Overall, I am expecting to see some movement in the markets and mortgage rates this week. The bond market will close early Thursday and will be closed all day Friday in observance of the Christmas Day holiday. This means that firms that trade in bonds will likely be keeping only a skeleton staff the latter part of the week and raises the possibility of a s tronger reaction to surprises in the economic data than we normally would see. Accordingly, proceed cautiously this week if still floating an interest rate and closing in the immediate future.
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.