May 14th, 2008 10:30 AM by Lehel Szucs
Wednesday's bond market has opened in positive territory after this morning's economic data eased inflation concerns. The stock markets are showing gains with the Dow up 105 points and the Nasdaq up 22 points. The bond market is currently up 7/32, but we will likely still see an increase of approximately .250 of a discount point in this morning's rates as a result of weakness in bonds late yesterday.
The Labor Department reported that April's Consumer Price Index (CPI) rose 0.2% and that the core data reading rose only 0.1%. Both of those readings were 0.1% below forecasts, indicating that inflationary pressures at the consumer level of the economy were not as strong as expected. That is very good news for bonds and mortgage rates, however, limiting this morning's improvements are strong stock gains.
Tomorrow's only relevant economic news is April's Industrial Production report that gives us an indication of manufacturing sector strength by track ing production at U.S. factories, mines and utilities. It is expected to show a decline in output of 0.3%. A larger decline would be good news for bonds and mortgage pricing, but this report is considered moderately important so it will take a large variance from forecasts to cause much movement in rates.
We will also see weekly unemployment figures from the Labor Department tomorrow morning. Since this data tracks only a week's worth of claims, it likely will not have much of an influence on mortgage rates tomorrow. It is expected to show that 370,000 new claims for benefits were filed.
There are two pieces of data due to be posted Friday. April's Housing Starts is the first and is the least important of the two. This data measures housing sector strength and mortgage credit demand by tracking new permits and actual starts of new home construction. It is expected to show a decline in new starts from March's readings. But, since this report is not c onsidered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts.
The last report of the week is May's preliminary reading to the University of Michigan's Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. It is expected to show a reading of 63.0, which would be a slight increase from last month's final reading. If it shows a decline in consumer confidence, bond prices will likely rise. This should lead to mortgage rates moving slightly lower Friday.
If I were considering financing/refinancing a home, I would.... Lock 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 o pinion 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.
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