March 17th, 2010 10:19 AM by Lehel S.
Wednesday's bond market has opened slightly in positive territory after this morning's economic data gave us some relatively favorable results. The stock markets are showing gains with the Dow up 50 points and the Nasdaq up 13 points. The bond market is currently up 2/32, but we should still see an improvement in this morning's mortgage rates of approximately .125 of a discount point.
The Labor Department gave us this morning's data, showing a 0.6% decline in February's Producer Price Index (PPI). This was much weaker than expected, but the core data reading rose 0.1%, matching forecasts. This means that prices at the producer level of the economy fell more than thought, but if food and energy prices are excluded there was no surprise. That can be considered neutral to good news for bonds and mortgage rates because it indicates inflation did not rise more than predicted last month?at least not at the producer level of the economy.
The more impo rtant Consumer Price Index (CPI) will be released early tomorrow morning. It measures inflationary pressures at the very important consumer level of the economy. Its results can definitely have a huge impact on the financial markets, especially long-term securities such as mortgage-related bonds. It is expected to show a 0.1% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker than expected readings tomorrow, bond prices should rise and mortgage rates will likely fall.
The Conference Board will post its Leading Economic Indicators (LEI) for February late tomorrow morning. This index attempts to measure economic activity over the next three to six months. Current forecasts are calling for a 0.1% increase, indicating that economic activity will likely expand slightly in the coming weeks. A decline would be considered good news for the bond market and mortgage rates.
Tomorrow also brings us the release of last week's unemployment figures, but unless we see a large difference between the 450,000 new claims that are expected and the actual total that is announced, this data will likely have little influence on the bond market and mortgage rates. The CPI reading is much more important to the markets than a single week's worth of unemployment figures.
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... 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.