June 23rd, 2009 8:40 AM by Lehel Szucs
Tuesday's bond market has opened in positive territory again after this morning's economic data showed weaker than expected results and the stock markets are posting early losses. The major stock indexes are in negative ground with the Dow down 35 points and the Nasdaq down 8 points. The bond market is currently up 10/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.
The National Association of Realtors announced this morning that home resales rose 2.4% last month. This was an increase from April's sales, but was a smaller rise than analysts had expected. This indicates that the housing sector did improve last month, but at a slower pace than many had thought. Generally speaking, a softening housing sector makes an economic recovery that much more difficult, which helps to keep bonds more attractive to investors. However, this particular data is not considered to be one of the more important reports we see e ach month. Therefore, its impact on trading and mortgage rates is usually fairly minimal.
This week's FOMC meeting began today but will not adjourn until tomorrow afternoon. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting. But, as we have seen so many times in the past, it is the post meeting statement that often creates the most volatility in the markets. They could give an opinion of the overall economy or inflation, hinting at a possible future move or lack of one. Statements like these could cause a knee-jerk reaction in the markets and possibly mortgage pricing tomorrow afternoon.
May's Durable Goods Orders is the more important of tomorrow's two reports. It gives us an indication of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last three or more years. This data is known to be quite volatile from month to month and is expe cted to show a decline of 0.9% in new orders from April to May. A larger decline would be the ideal scenario for the bond market and could lead to a decline in mortgage pricing tomorrow.
Also tomorrow is the release of May's New Home Sales that is similar to today's Existing Home Sales report. This report tells us how well sales of newly constructed homes were last month. It is also expected to show a rise in sales, but will likely not have much of an impact on mortgage rates because this data is considered to be of low importance to the markets.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float 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 gua ranteed to be in the best interest of all/any other borrowers.
©Mortgage Commentary 2009