April 28th, 2009 10:46 PM by Lehel Szucs
Tuesday's bond market has opened in negative territory after this morning's only relevant economic data revealed a much stronger than expected reading. The stock markets are showing modest gains with the Dow up 21 points and the Nasdaq up 5 points. The bond market is currently down 5/32, but we still should see an improvement in this morning's mortgage rates of approximately .125 of a discount point due to strength in bonds late yesterday.
The Conference Board reported late this morning that their Consumer Confidence Index (CCI) for April jumped to 39.2. This is a six-month high for the index and a much stronger reading than the 28.8 that was expected. That indicates that consumers were much more optimistic about their own personal financial situations than many had thought. The negative impact on bonds comes from the belief that higher levels of confidence makes it much more likely that consumers will make larger purchases in the near future. And since consumer spending makes up two-thirds of the U.S. economy, any related data is considered important and can influence bond trading.
Tomorrow is going to be a pretty interesting day. We have the possibility of seeing plenty of volatility in the markets and therefore, mortgage rates also. The first event is the release of the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best indicator of economic growth or contraction. I expect this report to cause major movement in the financial markets tomorrow morning. Analysts are expecting to see a decline in output at an annual rate of 4.9%. A larger decline would be ideal for mortgage rates. But, a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mort gage rates tomorrow morning.
This week's FOMC meeting begins today and will adjourn tomorrow afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the 2:15 PM ET post-meeting statement.
With the preliminary version of the GDP being released during morning trading and the FOMC meeting adjourning during afternoon hours, there is a decent possibility of the markets changing directions more than once tomorrow. Accordingly, I strongly recommend maintaining contact with your mortgage professional if still floating an interest rate.
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.
©Mortgage Commentary 2009