June 24th, 2008 10:50 AM by Lehel Szucs
Tuesday's bond market has opened in positive territory following the release of much weaker than expected economic data. The stock markets are showing losses with the Dow down 71 points and the Nasdaq down 22 points. The bond market is currently up 12/32, which will likely improve this morning's mortgage rates by approximately .125 of a discount point.
The Conference Board posted June's Consumer Confidence Index (CCI) late this morning, revealing a reading of 50.4. This was much lower than the forecasted reading of 56.0 and was the lowest reading since February 1992. This indicates that consumers are much less optimistic about their own financial situations than many had thought. That is considered good news for bonds and mortgage rates because the falling confidence usually means consumers are less apt to make large purchases in the near future. With consumer spending making up two-thirds of the U.S. economy, any related data often has a big impact on t he markets.
The only important release scheduled for tomorrow is May's Durable Goods Orders, which gives us an indication of manufacturing sector strength. It is known to be quite volatile from month to month and is expected to show no change new orders from April to May. A decline in new orders would be the ideal scenario for the bond market and could lead to a decline in mortgage pricing tomorrow morning. However, tomorrow afternoon's events will probably influence rates much more than the day's data will.
There are two housing related reports scheduled for release this week, with the first coming tomorrow morning. May's New Home Sales will be released tomorrow while Existing Home Sales will be posted Thursday morning. These reports give us a measurement of housing sector strength and mortgage credit demand, but usually do not cause much movement in mortgage rates.
The FOMC meeting that began today will adjourn tomorrow afternoon. It is wi dely 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, 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. I suspect we will hear concerns about inflation that will lead to selling in bonds that will drive mortgage rates higher.
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 opini on and cannot be guaranteed to be in the best interest of all/any other borrowers.
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