December 23rd, 2008 11:13 AM by Lehel Szucs
Tuesday's bond market has opened flat after this morning's economic data failed to show any major surprises. The stock markets are reacting similarly with the Dow down 16 points and the Nasdaq nearly unchanged from yesterday's close. The bond market is also practically unchanged but we will still see an increase in this morning's rates of approximately .250 - .375 of a discount point.
The first of today's four reports was the final revision to the 3rd Quarter GDP that showed a 0.5% decline. This matched forecasts but was not likely to significantly impact mortgage pricing anyhow. The data is quite aged by now and next month we get the initial reading on this quarter's activity, so analysts do not pay much attention to this version of the report unless it varies greatly from forecasts.
November's Existing and New Home Sales reports were both posted this morning and both revealed larger than expected drops in sales. This indicates that the housin g sector is still softening and not near the ?floor? that many are attempting to predict. However, this is good news for bonds and mortgage rates because a weakening housing sector will make slow the economic recovery and keeps inflation fears to a minimal.
The last report of the day did reveal a higher than expected level of consumer sentiment. The University of Michigan's Index of Consumer Sentiment for December was revised and showed a higher level of sentiment than the previous estimate. The reading of 60.1 means that consumers were more optimistic about their own financial situation than many had thought. This is considered bad news for bonds because rising sentiment means that consumers are more apt to make large purchase sin the near future. Still, this report ha snot had a significant impact ton today's trading.
The last event of the day is the 5-year Treasury Note auction. If the sale is met with a decent demand from investors, we could se e interest in other notes and bonds such as mortgage-related bonds increase during afternoon trading. But, a lackluster interest from investors may also lead to weakness in bonds and possible upward afternoon revisions to mortgage pricing.
Tomorrow morning brings us the release of November's Durable Goods Orders and the Personal Income and Outlays report. The Durable Goods Orders report tracks new orders for big-ticket items and is expected to show a drop of 3.1%. The Income and Outlays report is likely to show that personal income was unchanged from October and that spending fell 0.8% last month. Weaker readings would be good news for the bond market and mortgage rates.
Also worth noting is an early close tomorrow ahead of the Christmas Day holiday. The markets will be closed Thursday in observance of the holiday but will be open Friday. The bond market will close early Friday also. However, I am expecting to see a very quiet couple of days as many traders are home for the holidays.
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 interest of all/any other borrowers.
©Mortgage Commentary 2008