Our Real Estate Blog

Mortgage Rates (7/15/2010)

July 15th, 2010 2:42 PM by Lehel S.

Thursday's bond market has opened in positive territory after this morning's important economic data failed to show any significant surprises. The stock markets are helping by starting the day with noticeable losses. The Dow is currently down 94 points while the Nasdaq had lost 23 points. The bond market is currently up 4/32, which with yesterday's late gains should improve this morning's mortgage rates by approximately .125 - .250 of a discount point.

Today's key data came from the Labor Department, who said June's Producer Price Index (PPI) fell 0.5%. This was a bigger decline than was expected, but the more important core reading that excludes costs for more volatile food and energy items matched forecasts with a 0.1% increase. Since the core data matched expectations, the data has failed to have much of an impact on this morning's bond trading or mortgage rates.

The Labor Department also said that only 429,000 new claims for unemployment be nefits were filed last week. Analysts were expecting to see 450,000 new claims, so this report can be considered negative news for the bond market. But, since it tracks only a single week's worth of new claims, its impact on the markets is minimal.

June's Industrial Production data was also released this morning. It showed that output at U.S. factories, mines and utilities rose 0.1% last month. This was slightly higher than forecasts, but not by enough that would signal manufacturing sector growth. Therefore, this data has also had little influence on today's mortgage rates.





We saw strength in bonds late yesterday as a result of the FOMC minutes that did give us some unexpected details about the Fed's thoughts on the economy. There appears to be some concern that more stimulus may be needed if the economy does not continue to expand at their projected pace. They also revised their growth estimates for the economy lower than the y previously predicted. They now expect the economy to grow this year at an annual rate of between 3.0% and 3.5%, down from the 3.2% - 3.7% range that was made in April. This news made long-term securities such as mortgage-related bonds more attractive to investors and helped boost bond prices during afternoon trading yesterday.

Tomorrow morning brings us the release of two more reports for the markets to digest. The first is extremely important to the bond market and mortgage rates. That is June's Consumer Price Index (CPI), which is the sister report to today's PPI. The CPI measures inflationary pressures at the more important consumer level of the economy, where today's tracks producer level inflation. Analysts have forecasted no change in the overall index and a 0.1% rise in the core data. The core data is considered to be the key reading because it gives us a more stable measure of inflation. Higher than expected readings could raise inflation fears and p ush mortgage rates higher tomorrow, while readings that fall short of forecasts could lead to lower rates. 

The second report of the day is the University of Michigan's Index of Consumer Sentiment. This index is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary reading for July will be posted late tomorrow morning and is expected to fall from June's final reading of 76.0. This would indicate that consumers were less comfortable with their own financial situations this month than last month. It is believed that if consumers are confident in their own finances, they are more apt to make large purchases in the near future. And with consumer spending making up two-thirds of our economy, investors pay close attention to reports such as these.

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 plac e 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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Posted by Lehel S. on July 15th, 2010 2:42 PM

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