February 4th, 2010 12:29 PM by Lehel S.
Thursday's bond market has opened up sharply following an early sell-off in stocks. The stock markets are in selling mode as investors become wary of tomorrow's key employment report. The Dow is currently down 192 points while the Nasdaq has lost 42 points. The bond market is currently up 24/32 as investors seek safe-haven, which should improve this morning's mortgage rates by approximately .250 of a discount point.
This morning's economic data gave us mixed results with the 4th quarter Employee Productivity and Costs data showing a 6.2% increase that fell short of expectations and December's Factory Order's data rising 1.0% compared to the 0.5% that was forecasted. Both of those can be considered negative for bonds and mortgage rates but neither is considered to be highly important.
The good economic news came from the Labor Department who reported that 480,000 new claims for unemployment claims were filed last week when analysts were expecting to see 455,000. While this data usually is not a major factor to the markets, it was enough of a variance from forecasts right before tomorrow's monthly figures that it caused selling in stocks. That led to bonds being in favor this morning and mortgage rates improving.
The Labor Department will be in the spot light again tomorrow morning when they post January's Employment data. This report will give us the U.S. unemployment rate and the number of jobs added or lost during the month among other related statistics. Analysts are expecting to see the unemployment rate remain at 10.0% and that approximately 15,000 new jobs were added to the economy. An increase in unemployment and a loss in payrolls would be great news for the bond market. It would probably create another bond market rally, leading to lower mortgage rates tomorrow morning. However, if the report reveals stronger than expected results, we can expect to see mortgage rates move higher tomorrow.
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.