June 25th, 2009 8:26 AM by Lehel Szucs
WEDNESDAY AFTERNOON UPDATE:
The FOMC meeting has adjourned with no change to key short-term interest rates. The post meeting statement indicated that the economy is still weakening, but at a slower pace. This leads the Fed to be optimistic that the economy is stabilizing. It also said that they expect "inflation will remain subdued for some time." The inflation news is very good for bonds but the fact they felt the economy may be stabilizing offset the inflation words.
The stock and bond markets have reacted negatively to the news with the Dow giving back all of this morning's gains to currently stand down 34 points. The Nasdaq has fallen off earlier highs but is still in positive territory. The bond market has slipped further into negative ground despite a strong 5-year Treasury Note auction today. It is now down 11/32, which will likely cause many lenders to revise their rates slightly higher this afternoon. However, some may op t to wait until the morning's data and market open to reflect that loss.
The Commerce Department reported this morning that Durable Goods Orders rose 1.8% last month. This was much stronger than the 0.9% decline that was expected and the third increase in orders out of the past four months. This indicates that manufacturing activity, at least in big-ticket items such as machinery, vehicles and electronics, is strengthening quicker than many had thought. This would be considered bad news for bonds and mortgage rates.
May's New Home Sales was also released this morning, showing that sales of newly constructed homes fell slightly last month. Analysts were expecting to see a small increase in sales. However, this data only represents approximately 25% of all home sales, so its impact on trading and mortgage rates is usually minimal unless its results vary greatly from forecasts.
The only relevant economic data scheduled for release tomorrow is the final reading to the1st Quarter GDP and weekly unemployment claims. The GDP data is quite aged now (covers January through March) and will likely have little impact on the bond market or mortgage pricing unless it varies greatly from previous readings. Last month's first revision showed a 5.7% decline in the GDP. This month's second and final revision is expected to show the same decline.
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 guaranteed to be in the best interest of all/any other borrowers.
©Mortgage Commentary 2009