May 27th, 2010 9:33 AM by Lehel S.
Thursday's bond market has opened down sharply following a strong rebound in stock prices. The stock markets are rallying around overseas news, pushing the Dow up 205 points and the Nasdaq up 57 points. The bond market is currently down 37/32, which will likely push this morning's mortgage rates higher by approximately .500 of a discount point.
Today's only important economic data was the first revision to the 1st quarter Gross Domestic Product (GDP). It showed that the economy grew at an annual rate of 3.0% during the first three months of this year. This was a decline from the previous estimate of 3.2% and even lower than forecasts of 3.3%. That means that the economy was not as active as many had thought, which is good news for bonds and mortgage rates. However, the data is being ignored due to the stock volatility.
Also posted this morning were weekly unemployment figures from the Labor Department. They announced that 460,000 new claims for unemployment benefits were filed last week, down from the previous week but a little higher than what analysts had expected. But since this data tracks only a week's worth of new claims it usually does not influence mortgage rates unless it varies greatly from forecasts.
Today's economic data was actually favorable for bonds, but due to the shift from safety (reverse of the recent flight to safety), funds are moving out of bonds and back into stocks this morning. As stocks spiraled lower following concerns about the global economy and the financial issues overseas, investors moved money into bonds as a safe-haven from the stock selling. That led to lower mortgage rates over the past two weeks. However, if those concerns continue to ease as they have showed this morning, we could be in for more increases to mortgage rates in the very near future. Accordingly, please maintain contact with your mortgage professional if still floating an in terest rate.
There is also today's 7-year Treasury Not auction that deserves our attention. This sale is a little longer term than yesterday's 5-year Note sale and closer to mortgage-related bonds. Therefore, its results may influence mortgage rates this afternoon if the sale was met with a particularly weak or strong demand from investors. With today's active bond selling, it is difficult to expect a strong sale, so I would not rely on this event to improve mortgage rates later today. The results of the sale will be posted at 1:00 PM ET, meaning any impact it will have on rates will come sometime after that.
Tomorrow morning brings us the release of two relevant economic reports. April's Personal Income and Outlays data is the first and will be posted at 8:30 AM ET. It gives us an indication of consumer ability to spend and current spending habits. An increase in income means that consumers have more money available to spend. Since consumer spendi ng makes up two-thirds of the U.S. economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.4% increase in income and a 0.3% rise in spending. Weaker readings would be considered good news for bonds and mortgage rates, but I would not be surprised to see the stock markets take center stage yet again tomorrow.
The second report of the will come from the University of Michigan who will update their Index of Consumer Sentiment for May. It is forecasted to show a small increase from this month's preliminary reading of 73.3. A reading above 73.7 would be considered negative for bonds. This data is less important to the mortgage market than the Personal income and Outlays report is, so look for it to be a non-factor in tomorrow's pricing unless the stock markets are calm and the first report matches forecasts.
If I were considering financing/refinancing a home, I would.... Lock if my closing was ta king 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.