July 1st, 2008 11:13 AM by Lehel Szucs
Tuesday's bond market has opened in positive territory despite the release of stronger than expected economic news. The stock markets are showing losses with the Dow down 38 points and the Nasdaq down 6 points. The bond market is currently up 5/32, but we likely will see little change in this morning's mortgage rates due to some weakness late yesterday.
The Institute of Supply Management (ISM) reported late this morning that their manufacturing index for June rose from 49.6 in May to 50.2 in June. Analysts were expecting to see a decline in the index with a reading of 48.6. This means that manufacturer sentiment was stronger than thought. This is actually considered to be negative news for bonds and mortgage rates, however, the market seems to be geared towards oil and stock prices today.
The Commerce Department will post May's Factory Orders data late tomorrow morning, which is similar to the Durable Goods Orders report that was released last week. The biggest difference being that tomorrow's report covers both durable and non-durable goods. It usually doesn't have as much of an impact on the bond market as the durable goods data does, but can lead to changes in mortgage pricing if it varies from forecasts. Current expectations are showing a 0.5% rise in new orders from April's levels. A smaller than expected rise in orders would be considered good news for the bond market and should help lower mortgage rates slightly tomorrow.
I would not be surprised to see some volatility in bonds and possibly mortgage rates later today and tomorrow. Accordingly, it may be wise to lock an interest rate if closing in the immediate future if you are still floating. This volatility, if it does come, could improve mortgage rates or lead to upward revisions. I am not so certain that they will be favorable to mortgage shoppers, hence the lock recommendation. This doesn't mean that I am sure rates will move higher over the next day or so. It simply means that the likelihood of seeing much of an improvement during that time frame is outweighed by the potential risk of a spike in rates. Maintaining fairly constant contact with your mortgage professional is recommended for the next few days.
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.
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