February 23rd, 2010 9:20 AM by Lehel S.
Tuesday's bond market has opened strong following news of a surprising drop in consumer confidence. The stock markets are reacting negatively to the data with the Dow down 62 points and the Nasdaq down 28 points. The bond market is currently up 29/32, which should improve this morning's mortgage rates by approximately .250 - .375 of a discount point.
The Conference Board gave us today's important data with the release of February's Consumer Confidence Index (CCI). They reported a reading of 46.0 that was well below forecasts of a 55.0 reading. This means that consumers were far less optimistic about their own financial situations than many had thought. This is very good news for the bond market and mortgage rates because waning levels of confidence usually translates into lower levels of consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, related data gets watched closely.
This morning's data was great news for t he mortgage market and has turned many heads. If this is the start of a period of declining confidence, analysts will become concerned about consumer spending, the housing market and overall economic growth. If consumers are concerned about losing their job or their general financial situation, they are less apt to purchase a new home or make other large purchases in the near future. This would limit economic expansion and threaten the recovery that is supposedly underway. However, let's keep in mind that this is a single report that seems to be out of whack. Accordingly, I am still holding the concerned outlook for mortgage rates, at least for the time being. If we get further readings that support today's data, that stance will certainly change.
January's New Home Sales report will be posted late tomorrow morning. This is one of the least important reports of the week, and it is the sister report to Friday's Existing Home Sales release. They measure housin g sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates. They are both expected to show an increase in sales.
Fed Chairman Bernanke will deliver the Fed's semi-annual testimony on the status of the economy late tomorrow and Thursday mornings. He will be speaking to the House Financial Services Committee tomorrow and the Senate Banking Committee Thursday. Market participants will watch the Fed Chairman's words very closely. He is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what he says during this testimony. Look for him to address the unemployment and housing crises specifically and their impact on the overall economy. His testimony begins at 10:00 AM ET with a prepared statement then is followed by Q & A with committee members. I am expecting to see the markets flu ctuate during this session, possibly affecting mortgage rates also.
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... Lock 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.