April 7th, 2009 10:48 PM by Lehel Szucs
Tuesday's bond market opened up in positive territory following early stock losses. The stock markets are showing another negative morning with the Dow down 153 points and the Nasdaq down 30 points. The bond market is currently up 8/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.
There are no relevant economic reports scheduled for release today, but we do have the first of this week's two Treasury auctions that may influence mortgage rates. The Fed will sell $6 billion of 10-year Treasury Inflation Protected Securities (TIPS) today. Results of the sale will be posted at 1:00 PM ET. If it was met with a strong demand, we should see bond prices rise during afternoon trading, possibly improving mortgage rates. However, a weak demand could lead to selling in bonds and an upward revision to mortgage rates.
Helping fuel this morning's stock selling is the beginning of quarterly earnings season. Aft er the markets close today the first of the big name earning reports will be released. Market participants are concerned that we may see weaker than expected results in those corporate earnings. This has led to an interest in bonds as investors prepare for a possible sell-off in stocks in the coming days if it appears that the recession has hit earnings worse than thought. The downside for bonds is that if the quarterly earnings beat expectations, particularly in the big-name companies, stocks will likely rise and bonds will fall. That could lead to upward movement in rates.
Tomorrow afternoon brings us the release of the minutes from the last FOMC meeting. Market participants will be looking at these minutes closely. They give us insight to the Fed's current thought process and individual Fed member opinions. Any surprises in the 2:00 PM ET release could cause afternoon volatility in the markets tomorrow and possible changes in mortgage pricing.
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.
©Mortgage Commentary 2009