May 29th, 2008 4:34 PM by Lehel Szucs
Thursday's bond market has opened in negative territory as investor interest appears to be shifting towards stocks and non-mortgage related securities. The stock markets are showing gains with the Dow up 47 points and the Nasdaq up 14 points. The bond market is currently down 23/32, which will likely push this morning's mortgage rates higher by approximately .500 of a discount point.
There were two pieces of economic data released this morning. The first was the preliminary revision to the 1st quarter Gross Domestic Product (GDP). It matched forecasts with a 0.9% annual pace of growth that was an upward revision from the initial estimate. An important inflation reading in the data also matched forecasts, so today's report didn't reveal any surprises.
The Labor Department gave us last week's unemployment figures, saying that 372,000 new claims for benefits were filed during the week. This was slightly above the 370,000 that was expected, so had little impact on bond trading or mortgage rates because this data is generally of low importance to the markets unless it varies greatly from forecasts.
Tomorrow brings us the release of two pieces of data with the first being April's Personal Income and Outlays data at 8:30 AM. This report 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 spending 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 0.2% rise in income and a 0.2% increase in spending. Weaker readings would be considered good news for bonds and mortgage rates.
The last report of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. It measures consumer willingness to spend by tracking their confidence in their own f inancial situations. An upward revision from the preliminary 59.5 reading would be considered a negative for bonds.
Yesterday's bond weakness that has carried over into this morning's trading pretty much answers the question proposed yesterday if 4.00% is going to be a level of upward resistance. There seemed to be very little resistance as bond prices dropped over the past 24 hours and the yield on the benchmark 10-year Note shot up to 4.10%. I suspect that this may now be the lower end of a new trading range if this level holds for another day. That means that bond prices are more likely to fall than they are to rise, leading to upward movement in yields and mortgage rates. Accordingly, I am holding the lock recommendations across the board until we have stability below that level.
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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