February 25th, 2010 2:52 PM by Lehel S.
Thursday's bond market has opened in positive territory following favorable economic data and early stock market losses. The major stock indexes are giving back yesterday's gains with the Dow currently down 160 points and the Nasdaq down 30 points. The bond market is currently up 12/32, which should improve this morning's mortgage rates by approximately .125 of a discount point over yesterday's morning rates.
January's Durable Goods Orders report was released early this morning, showing a surprising 3.0% increase in new orders for big-ticket items. This was much larger than the 1.4% increase that was expected, however, an upward revision of 0.9% to December's orders made the month-to-month change less drastic. Also, a reading within the report that tracks new orders for products not attributed to transportation related items actually fell 0.6% when it was expected to rise. This means that overall new orders rose more than expected, but when more volatile tr ansportation related orders are excluded, new orders fell short of forecasts. We can consider these results neutral or slightly favorable to bonds.
The Labor Department gave us last week's unemployment figures, announcing that 496,000 new claims for benefits were filed last week. This was much higher than expected and just a bit shy of the important benchmark of 500,000. It also means that new claims rose 12% over the past two weeks, raising concerns that the employment crisis may be worsening before it gets much better. This data usually has little impact on the markets, but the back-to-back spikes have influenced bonds and mortgage rates favorably this morning.
Also worth noting are the second day of testimony from Fed Chairman Bernanke and the 7-year Treasury Note auction. Mr. Bernanke is expected to repeat yesterday's speech to the Senate Banking committee today, so it will likely have little influence on trading and mortgage rates unless the Q & A portion of the proceeding reveals any surprises. Yesterday's 5-year Note auction did not go very well, so there is little expectation that today's 7-year sale will go much better. I don't suspect these two events will create much movement in the markets today nor will they affect this afternoon's mortgage rates. If we see a revision to pricing, it will likely be a result of a significant swing in the major stock indexes.
There are two relevant reports being posted tomorrow. The first of two revisions to the 4th Quarter GDP reading is the first one. It will be posted early tomorrow morning. Analysts' forecasts currently call for an annual rate of growth of 5.7%, which would be no change from the preliminary estimate last month. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market, while a sizable downward revision would be good news and could lead to improvements in mortgage pricing.
The last piece of data scheduled for release this week is the University of Michigan's revision to their Index of Consumer Sentiment for February late tomorrow morning. Current forecasts show this index revising slightly higher than previously thought. The preliminary reading was 73.7 and is now expected to stand at 73.9, indicating that consumer sentiment was slightly stronger than previously thought. This index is fairly important because it helps us measure consumer confidence that translates into consumer willingness to spend.
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.