February 26th, 2009 9:34 AM by Lehel Szucs
Thursday's bond market has opened in negative territory as yesterday afternoon's selling continues. The stock markets are showing gains with the Dow up 114 points and the Nasdaq up 15 points. The bond market is currently down 24/32, which will likely push this morning's mortgage rates .250 of a discount point higher than yesterday's afternoon rates. If your lender did not revise higher yesterday, then you will see an increase of approximately .500 - .625 of a discount point compared to yesterday's morning rates.
The bond market continues to show weakness despite a couple of economic reports that somewhat underscore the economic problems we are currently facing. The Commerce Department reported that new orders for big-ticket items fell 5.2% last month, more than twice the decline that analysts were expecting. The report also revealed a significant downward revision to December's order. What was previously announced as a 2.6% drop in orders during December is now said to be 4.6%. This indicates that the manufacturing sector is still weakening. That should be good news for the bond market and mortgage rates, but has not been able to offset the recent selling in bonds.
Today's other two releases are much less important to the markets than the Durable Goods Orders report is but the footnotes of the weekly unemployment claims and January's New Home Sales releases bring to light how bad some parts of the economy are. The Labor Department gave us last week's unemployment figures, saying that 667,000 new claims for benefits were filed last week. This was much higher than what was expected and is the highest number of claims in approximately 26 years.
January's New Home Sales figures were also posted today, revealing a 10% decline in sales of newly constructed homes. This can be considered the week's least important data but it also brings sales down to their lowest level since records began in 1963. That further supports the theory that the housing sector has not bottomed out yet.
The first of two revisions to the 4th Quarter GDP reading is scheduled for release tomorrow morning. Analysts' forecasts currently call for a decline of 5.4%, indicating that the economy was weaker in the last quarter of the year than initially thought. 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.
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. Current forecasts show this index revising slightly higher than previously thought. The preliminary reading was 56.2 and is now expected to stand at 56.0, indicating that consumer sentiment was slightly weaker than previously thought. This index is important because it helps us measure consumer confidence th at 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... Float 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.
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