March 24th, 2010 12:22 AM by Lehel S.
Tuesday's bond market has opened flat after this morning's only economic data nearly matched forecasts. The stock markets are showing minor gains with the Dow up 24 points and the Nasdaq up 2 points. The bond market is nearly unchanged from yesterday's close, but we will still likely see an improvement in this morning's mortgage rates of approximately .125 of a discount point.
The National Association of Realtors reported late this morning that sales of existing homes fell 0.6% last month, which was very close to forecasts. That indicates that the housing sector remained fairly flat last month because this data tracks approximately 85% of all home sales in the U.S. Since this data is not considered to be highly important to the markets and it showed no significant surprises, its impact on this morning's bond trading and mortgage rates has been minimal.
We have two reports scheduled for release tomorrow morning. The first is the most important o n this week's calendar, but is not considered to be one of the most important we see each month. The Commerce Department will release February's Durable Goods Orders early tomorrow morning. It gives us a measurement of manufacturing sector strength by tracking new orders for big-ticket items, or products that are expected to last three or more years. This data is known to be volatile from month to month but is still considered to be of high importance. Analysts are expecting it to show an increase in new orders of approximately 0.6%. A larger increase would be considered negative for bonds as it would indicate economic strength and could lead to higher mortgage rates tomorrow morning.
We also get the sister report to today's housing data- February's New Home sales. This report tracks sales of newly constructed homes and usually has less of an influence on bond trading and mortgage rates than today's Existing Homes Sales report did. In other words, it will take a large variance between its actual readings and forecasts for it to lead to changes in mortgage pricing. Current forecasts are expecting a small increase in sales from January's level.
Also tomorrow is the first of two relatively important Treasury auctions that may also affect bond trading enough to change mortgage rates. There will be an auction of 5-year Notes tomorrow and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each day, so look for any reaction to come during afternoon hours.
If I were considering f inancing/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.