May 29th, 2009 10:12 AM by Lehel Szucs
Thursday's bond market has opened fairly strong, recovering a good part of yesterday's late sell-off. The stock markets opened in positive territory, appearing to follow the same pattern as bonds. However, the major stock indexes have given back those gains and are currently showing losses with the Dow now down 38 points and the Nasdaq down 9 points. The bond market is currently up 18/32, but with yesterday's afternoon selling we will likely see an increase of .750- .875 of a discount point in this morning's rates compared to yesterday's morning rates.
This morning's economic data wasn't exactly favorable to bonds, but fortunately it has not heavily influenced trading. The Commerce Department reported an increase in April's Durable Goods Orders of 1.9%. This was much stronger than forecasts and indicates that manufacturing activity for big-ticket products may be stronger than expected. That is considered negative news for bonds because rising manufacturin g activity points towards an expanding economy.
April's New Home Sales data was also posted this morning, showing that there was little change from March's sales figures. Analysts were expecting to see a small increase sales, but since this data is not considered to be of high importance, the slight difference between forecasts and the actual sales total was not enough to impact mortgage pricing.
The Labor Department said that 623,000 new claims for unemployment benefits were filed last week. This was a smaller number than was expected, but since this tracks only a week's worth of claims its influence on trading and mortgage rates has been minimal.
Today's 7-year Treasury Note auction may influence bond trading and possibly mortgage rates later today. Yesterday's 5-year sale was met with a respectable demand, so hopefully today's sale will also go well. Results will be posted at 1:00 PM ET, so any reaction will come du ring afternoon hours.
The first of two revisions to the 1st quarter Gross Domestic Product (GDP) will be released at 8:30 AM tomorrow. The second revision to this report comes next month but isn't expected to have much of an impact on the financial 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 6.1% decline in the annual rate of growth. Analysts expect an upward revision to this reading with the consensus being a 5.5% decline. If the upward revision is stronger than expected, we may see the bond market react negatively and mortgage rates move higher.
The second report of the day and the last important data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. It is forecasted to show little change from this month's preliminary reading of 67.9. An upward revision would be considered a negative for bonds.
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... 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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