July 16th, 2008 9:50 AM by Lehel Szucs
Wednesday's bond market has opened in negative territory again after this morning's economic data revealed stronger than expected readings. The stock markets seem to be having little reaction to the news with the Dow up 4 points and the Nasdaq nearly unchanged. The bond market is currently down 15/32, which will likely push this morning's mortgage rates higher by approximately .375 of a discount point.
The big news this morning was June's Producer Price Index (PPI) from the Labor Department. They reported that the overall CPI reading rose 1.1% while the core data rose 0.3%. Both of these readings exceeded forecasts, indicating that inflationary pressures were more of a threat at the consumer level of the economy than many had thought.
June's Industrial Production data was also released this morning. It showed an increase in output at U.S. factories, mines and utilities of 0.5%. This was much stronger than the 0.2% increase that was expecting, m eaning manufacturing activity was higher than thoughts. This is considered bad news for the bond market and mortgage rates.
Part two of Fed Chairman Bernanke's testimony on the economy is being made to the House Financial Services Committee. I am not expecting his words to impact bonds or rates this morning unless something in the question and answer portion surprises us.
The minutes from the last FOMC meeting will be posted later today. There is a possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show some divisiveness by its members during discussion and voting at the last meeting. I am not expecting to see a change in rates as a result of them, but a possibility does exist.
Tomorrow's only relevant data is June's Housing Starts report. This data gives us an indication of housing sector strength, but is not considered to be of high importance. Analysts are currently expecting to see a smal l decline in new starts of housing projects. However, I don't see this data having a much of an impact on mortgage rates tomorrow unless it varies greatly from forecasts.
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.
©Mortgage Commentary 2008