July 15th, 2008 12:50 PM by Lehel Szucs
Tuesday's bond market has opened in positive territory again as the volatility in stocks continues. The stock markets are in negative territory with the Dow down 106 points and the Nasdaq down 28 points. The bond market is currently up 18/32, which likely improve this morning's mortgage by approximately .250 of a discount point.
The Labor Department gave us June's Producer Price Index (PPI) this morning, saying that prices rose 1.8% last month. This exceeds the 1.3% increase that was forecasted. However, the core data reading of 0.2% that excludes more volatile food and energy prices fell short of forecasts. This means that food and energy prices spiked more than expected, but since core prices did not rise as much as thought that data is being considered favorable for bonds.
June's Retail Sales report was also released today, showing a 0.1% increase in sales when analysts had predicted a 0.4% rise. This was lower than expected and indicates tha t consumers are being more frugal than thought. That is good news for bonds because consumer spending makes up two-thirds of the U.S. economy.
Fed Chairman Bernanke's testimony before the Senate Banking Committee this morning did not reveal any significant surprises. He indicated there was concern about the housing market along with energy costs and their impact on the economy, saying that they could drag on the economy the remainder of the year. He will likely repeat the same testimony tomorrow before the House Financial Services Committee. I am not expecting his words to impact bonds or rates tomorrow unless something in the question and answer portion surprises us.
Tomorrow brings us the release of June's Consumer Price Index (CPI). It is a mirror of today's PPI with the exception that the CPI measures inflation at the more important consumer level of the economy. Analysts have forecasted a 0.7% increase in the overall index a nd a 0.2% rise in the core data. The core data is considered to be the key reading because it excludes more volatile food and energy prices, giving us a more stable measure of inflation. Higher than expected readings could raise inflation fears and push mortgage rates higher tomorrow.
June's Industrial Production data will also be posted tomorrow morning. This data measures output and U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength. It is expected to show a 0.2% rise in production, indicating that the manufacturing sector showed moderate growth during the month. A smaller than expected increase would be good news and could help push mortgage rates slightly lower tomorrow.
Also worth noting is the release of the minutes from the last FOMC meeting. There is a possibility of the markets reacting to them following their 2:00 PM ET release tomorrow, especially if they show some divisiveness by its members durin g discussion and voting at the last meeting.
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... 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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