May 21st, 2010 9:42 AM by Lehel S.
Friday's bond market has opened in positive territory again as yesterday's stock selling extends into this morning. The stock markets are showing much smaller losses than yesterday's 376-point drop in the Dow but are still in the red, making bonds more appealing to investors. The bond market is currently up 13/32, but we will likely only see an improvement in this morning's mortgage rates of approximately .125 of a discount point.
There is no relevant economic data being posted today, so any changes to mortgage rates will likely come from stock market movements. The bond market has staged a significant rally recently, but almost entirely due to stock losses that came as a result of global economic concerns. Even with the stock sell-off, I strongly believe the bond market is over-bought and is very likely to go through a correction once the stock markets stabilize. It is my opinion that the correction will come even of stock prices do not rebound. Just a stabilization of the major indexes will be enough to fuel profit-taking in the bond market and a spike in mortgage rates. Therefore, please be careful if still floating an interest rate, especially with a closing date more than a couple weeks away.
Next week is packed with economic releases for the markets to digest. Whether or not they will mean much to bond traders remains to be seen. If the stock selling continues into next week, the economic data may be ignored and bonds could benefit further. We may see slightly lower mortgage rates, however, with the benchmark 10-year Treasury Note now at 3.16% it is difficult to believe there is room for much more improvement.
There is relevant data scheduled for release each day next week, including Monday when April's Existing Home Sales report will be posted by the National Association of Realtors. This report gives us a measurement of housing sector strength and mortgage credit demand. It is not conside red to be one of the more important pieces of data that we see each month, so it usually takes a large variance between forecasts and its actual results for the report to affect mortgage rates. But with data being posted each day and an early close Friday, there is potential to having another active week for the markets and mortgage pricing. Look for more details on next week's events in Sunday's weekly preview.
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... Lock 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.