July 10th, 2009 9:16 AM by Lehel Szucs
Friday's bond market has opened well in positive territory, recovering yesterday's losses. The stock markets are in negative ground with the Dow down 60 points and the Nasdaq down 2 points. The bond market is currently up 30/32, but we will still see an increase of approximately .250 of a discount point in this morning's mortgage rates as a result of yesterday's weakness.
Yesterday's 30-year Treasury Bond sale had mixed results. Some of the factors were favorable while others were not so good. The overall demand for the sale wasn't weak, but it was not strong and nowhere close to Wednesday's sale. The good part of that though was a high percentage of the bidders were international buyers, meaning there is still interest in U.S. securities from overseas. Since foreign governments hold over $3 trillion of U.S. debt, their ongoing appetite for U.S. securities is always watched closely.
Neither of today's economic reports were considered highly i mportant. The first was May's Goods and Services Trade Balance that revealed a $26.0 billion trade deficit. It was expected to show a $30.0 billion deficit, but this data is considered to be of fairly low importance to mortgage rates. It has more of an impact on the value of the U.S. dollar than it directly affects bonds or mortgage pricing. This creates an indirect influence on bonds because a stronger U.S. dollar makes U.S. securities, including mortgage-related bonds, more attractive to foreign buyers. That is due to the fact the investment's proceeds are worth more when the securities are sold and converted to the buyer's own currency. Therefore, the results of the report did not affect this morning's rates, but it could help create a more favorable environment for bonds over a longer period of time, assuming our own economic data does not show strength or inflation concerns.
The second report of the day was the University of Michigan's Index of Consumer Sentiment. It gave us a reading of 64.6 that was well below last month's final reading and current forecasts. Analysts were expecting to see a reading of approximately 70.0. This means that consumers were less optimistic about their own financial situations than many had thought. That indicates that consumers may be less apt to make large purchases in the near future, limiting future economic activity.
Next week is fairly active in terms of relevant economic releases. There is no important data scheduled to be posted Monday, but the rest of the week brings us a couple of key inflation readings, a very important consumer spending report in addition to a few other releases. We will also get to see the minutes from the most recent FOMC meeting. The relevant news starts Tuesday, but look for details on next week's events in Sunday's weekly preview.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place wit hin 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... 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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