June 4th, 2008 10:33 AM by Lehel Szucs
Wednesday's bond market has opened in negative territory following stock gains during morning trading. The stock markets are in positive territory with the Dow up 60 points and the Nasdaq up 30 points. The bond market is currently down 7/32, but we likely will still see an improvement in this morning's mortgage rates due to strength in bonds during afternoon trading yesterday.
The Labor Department said that this morning that the 1st Quarter Productivity and Costs reading actually rose at a 2.6% annual pace. This was slightly more than was expected, but is good news for bonds and mortgage rates. The preliminary reading showed a 2.2% pace and forecasts were calling for an upward revision to 2.5%. This means that workers were a little more productive during the quarter than what was thought. That is considered to be favorable to bonds and mortgage rates because strong levels of productivity are believed to allow the economy to grow without inflation concerns .
The second report of the day was the Institute for Supply Management's Services Index late this morning. It revealed a reading of 51.7 that was higher than expected, but lower than last month's 52.0 reading. Accordingly, this data has little impact on bond trading or mortgage rates this morning.
There is no relevant data scheduled for release tomorrow except for weekly unemployment figures from the Labor Department. They are expected to say that 372,000 new claims for unemployment benefits were filed last week, matching the previous week's total. Generally speaking, this data usually does not have an impact on mortgage rates because it tracks only a week's worth of claims. This may be the case again tomorrow, however, with Friday's monthly report coming out any sizable surprise could influence expectations for Friday's release and lead to changes in mortgage rates.
The Labor Department will post May's Employment data early Friday mornin g. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate climb to 5.1% with approximately a loss of 60,000 jobs during the month. A higher than expected increase in the unemployment rate and a larger drop in payrolls would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates Friday. But, if we see stronger than expected numbers, we will likely get a spike in mortgage rates. Accordingly, proceed with caution if still floating an interest rate.
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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