May 14th, 2009 9:30 AM by Lehel Szucs
Thursday's bond market has opened flat after this morning's inflation report failed to give us a significant surprise. The stock markets are showing gains during morning trading that have also helped keep bonds near yesterday's closing level. The Dow is currently up 45 points while the Nasdaq has gained 22 points. The bond market is currently down 1/32, but we will still likely see a slight increase in this morning's mortgage rates.
The Labor Department said this morning that April's Producer Price Index (PPI) rose 0.3%. This was higher than expected, however, the 0.1% increase in the core data reading that excludes more volatile food and energy prices matched forecasts. In other words, the overall index showed that prices rose more at the producer level of the economy than was predicted, but the more important core data did not reveal any surprises.
The Labor Department also released last week's unemployment figures, saying that 637,000 new c laims for benefits were filed. This was more than expected, which is favorable for bonds. However, this data is not important enough to heavily influence mortgage rates.
There are three relevant reports scheduled to be posted tomorrow. The first is the week's most important. April's Consumer Price Index (CPI) will be posted at 8:30 AM. It is similar to today's PPI report, but measures inflationary pressures at the more important consumer level of the economy. Its results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing. Current forecasts are calling for no change in the overall index and a 0.1% increase in the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices.
April's Industrial Production is the second relevant report. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is exp ected to show a 0.6% decline in production, indicating that manufacturing activity is slowing rapidly. A larger decline in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is weaker than expected.
The last report of the week is May's preliminary reading to the University of Michigan's Index of Consumer Sentiment. 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 65.0, which would be little change from last month's final reading. If it shows a decline in consumer confidence, bond prices will likely rise, assuming the CPI does not give us a significant surprise.
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 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.
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