April 23rd, 2010 9:16 AM by Lehel S.
Thursday's bond market has opened in positive territory following early stock weakness. The stock markets are showing sizable losses with the Dow down 70 points and the Nasdaq down 17 points. The bond market is currently up 4/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.
None of this morning's economic data can be considered favorable to the bond market or mortgage rates. The big news was March's Producer Price Index (PPI) that showed a 0.7% increase in the overall index and a 0.1% rise in the more important core data. The 0.7% reading was higher than expected, meaning prices at the producer level of the economy rose more than thought. That raises concerns because the costs usually have to be passed on to the consumer, fueling inflation. However, the core data reading that excludes more volatile food and energy prices matched forecasts, preventing bond selling. Therefore, we can consider this data to b e fairly neutral for mortgage rates.
The Labor Department said that new claims for unemployment benefits did fall last week as they were expected to do. The 456,000 new claims were a little higher than what analysts had forecast, but since it was still a sizable drop from the previous week's total of 480,000 claims this data has not impacted this morning's mortgage pricing.
The National Association of Realtors said late this morning that home resales rose 6.8% last month, exceeding expectations. This means that the housing sector was stronger than thought, which is negative news for bonds and mortgage rates. It is widely believed that the overall economy will not be able to really strengthen and maintain its recovery if the housing sector has not stabilized. So, we can consider this data negative for bonds also, but it is not considered to be a highly important report. This means it has had little influence on this morning's mortgage rates also.
March's Durable Goods Orders will be released early tomorrow morning. It gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products with a life expectancy of at least three years. Current forecasts are calling for an increase in new orders of 0.2%. This would be a sign of slight manufacturing sector growth, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A decline would be considered good news, while a large increase would indicate manufacturing sector strength. Ideally, the mortgage market would like to see a sizable decline in new orders.
Also tomorrow is the release of March's New Home Sales report. This data is similar to today's housing release except it covers the remaining 15% of home sales that today's does not. It is expected to show a n increase in sales of newly constructed homes. As with today's Existing Home Sales report, I don't see mortgage rates having much of a reaction to its results.
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.