April 2nd, 2009 6:20 PM by Lehel Szucs
Thursday's bond market has opened well in negative territory, mostly as a result of strong stock gains. The stock markets are rallying during early trading with the Dow currently up 260 points, crossing the 6,000 threshold, while the Nasdaq is up 60 points. The bond market is currently down 25/32, which will likely push this morning's mortgage rates higher by approximately .375 of a discount point.
This morning's economic data gave us mixed results with February's Factory Orders report showing a larger than expected jump in new orders. The 1.8% rise exceeded forecasts of a 1.5% increase in new orders, but this data is not important enough to fuel this type of reaction in the markets.
Today's second report was weekly employment figures from the Labor Department, who announced that 669,000 new claims for benefits were filed last week. This was more than what analysts had expected, but because this data is considered to be of low importance since i t tracks only weekly claims, its results have had little influence on trading or mortgage rates.
Today's selling in bonds can be attributed to a "flight from safety" that is drawing funds from bonds into stocks. This comes as little surprise as investors look for the bottom in the stock market. We need to be careful because much of the recent rally in bonds came from investors who sold stocks and shifted funds into bonds. If the stock markets continue to rise, we may see more selling of bonds, leading to higher mortgage rates. However, this does not necessarily mean that rates will continue to move higher or that the bear market in stocks is over. It simply means we need to be very attentive to day-to-day movements. The short-term outlook could be negative for bonds, hence the lock recommendation over the past few days. But in my opinion, there is still room for rates to move lower over the longer-term.
The Labor Department will post March's Emp loyment report tomorrow morning, giving us the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets and can heavily influence rates. It is expected to show an increase in the unemployment rate from February's 8.1% to 8.5% and that approximately 658,000 payrolls were lost during the month. A higher unemployment rate and a larger number of lost jobs would be good news for bonds and would likely push mortgage rates lower 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... 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 intere st of all/any other borrowers.
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