June 17th, 2008 11:17 AM by Lehel Szucs
Tuesday's bond market has opened in positive territory after this morning's economic news showed results that were mostly favorable to bonds. The stock markets are showing losses with the Dow currently down 60 points and the Nasdaq down 4 points. The bond market is currently up 20/32, which should improve this morning's mortgage rates approximately .250 of a discount point.
The Labor Department gave us today's first and most important data of the day with the release of May's Producer Price Index (PPI). It showed a whopping 1.4% increase in the overall index that was higher than expected, however, the more important core data reading matched forecasts of a 0.2% increase. This means that volatile food and energy prices rose more than expected, but that with those figures excluded, price remained close to expectations.
The second was May's Housing Starts report that showed a lower number of starts than analysts had expected. This is generally good news for the bond market because it gives us an indication of housing sector strength and weak housing has contributed greatly to the economic slowdown. However, this data is not considered to be of high importance to the markets.
The third and final piece of data also showed weaker than expected economic activity. May's Industrial Production was released mid-morning and revealed a 0.2% decline in manufacturing output. The 0.3% variance between forecasts and the actual reading is fairly large for this report and is contributing somewhat to the bond gains despite the data being considered moderately important.
There is no relevant economic news scheduled for release tomorrow. May's Leading Economic Indicators (LEI) will be posted late Thursday morning. The Conference Board, who is a New York-based business research group, will post this data. It attempts to predict economic activity over the next three to six months. If it shows rapidly rising levels of activity, bond prices will probably drop, pushing mortgage rates higher Thursday morning. But, a weaker than expected reading could lead to lower mortgage pricing. It is expected to show no change from April to May.
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.
©Mortgage Commentary 2008