May 28th, 2008 8:41 AM by Lehel Szucs
Wednesday's bond market has opened in negative territory following the release of stronger than expected economic news. The stock markets are showing modest gains with the Dow up 27 points and the Nasdaq up 2 points. The bond market is currently down 12/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point.
April's Durable Goods Orders data was posted this morning, showing a 0.5% decline in new orders for big-ticket items. This was much stronger than the 1.5% decline that was forecasted, indicating more manufacturing activity than thought. However, this data can be quite volatile from month to month, so it is difficult to gauge activity based on one month's surprise reading.
The first of two revisions to the 1st quarter Gross Domestic Product (GDP) will be released early tomorrow morning. The second revision to this report comes next month but isn't expected to have much of an impact on the fina ncial markets. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best indicator of economic growth. Last month's preliminary reading revealed a 0.6% annual rate of growth. Analysts expect an upward revision to this reading with the consensus being a .9% annual rate. If true, we may see the bond market react negatively and mortgage rates move higher.
Today's weakness has pushed the yield on the benchmark 10-year Treasury Note very close to 4.00%. It will be interesting to see if that level acts as resistance, meaning yields will move lower from here. Or, if we break above that threshold, the next level of resistance could mean 4.00% is base or floor. That would likely translate into higher mortgage rates. Accordingly, we need to proceed with caution towards rates until that question is answered. Therefore, locking a rate should be considered if not already done.
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.
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