May 1st, 2010 8:04 PM by Lehel S.
Friday's bond market has in positive territory after this morning's most important economic data gave us favorable results. The stock markets are also helping to boost bond prices with the Dow down 35 points and the Nasdaq down 15 points. The bond market is currently up 8/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.
The first of this morning's three economic reports was the most important of all of the week's data. The 1st Quarter Gross Domestic Product (GDP) came in at an annual rate of growth of 3.2%. This was slightly below forecasts, meaning the economy grew at slower pace than thought during the first three months of the year. In addition, a key inflation reading within the data was just below forecasts also. These are fairly good results for the bond market and mortgage rates.
The second report was the 1st Quarter Employment Cost Index (ECI) that showed a 0.6% increase in employer costs for wages and benefits. This was just above the 0.5% increase that was expected, so this data can be considered negative for bonds. However, it was not enough of a variance to have much of an impact t on this morning's rates.
The last was the University of Michigan's update to their Index of Consumer Sentiment for April. They announced a reading of 72.2, which exceeded forecasts of 71.0. This indicates that surveyed consumers were more confident about their own financial situations than thought, which is believed to mean they are more apt to make large purchases in the near future. Again, bad news for bonds and mortgage pricing, but the most important data of the day was favorable for bonds and had led to this morning's buying.
I would not be surprised to see further stock losses and bond gains before the day ends. It seems the momentum for bonds remains strong and that stocks could be due for another drop. If this is accurate, we could see funds shifted into bonds and mortgage rates move even lower. Accordingly, I am a little less cautious towards mortgage rates than I was earlier in the week.
Next week brings us the release of several relevant reports, including two important ones Monday morning. Early Monday we will get March's Personal Income and Outlays data that will give us a measurement of consumer ability to spend and current spending habits. Later Monday morning, the Institute for Supply Management (ISM) will post their manufacturing index that tells us manufacturer sentiment about current business conditions. Both can move the bond market enough to affect mortgage rates, so Monday will be a busy day. Look for more details on next week's events in Sunday's weekly preview.
If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float 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.