July 27th, 2009 8:54 AM by Lehel Szucs
Monday's bond market has opened in negative territory as investors prepare for this week's events. The stock markets are showing losses with the Dow down 41 points and the Nasdaq down 14 points. The bond market is currently down 17/32, which should push this morning's mortgage rates higher by approximately .250 of a discount point over Friday's morning rates.
Today's only relevant economic news was June's New Home Sales that revealed a surprising jump of 11% in sales of newly constructed homes. This was a much larger than expected increase and put sales at their highest level since last November, hinting that the housing sector may be stabilizing. This is negative news for bonds and mortgage rates, but today's weak opening in bonds has more to do with the amount of government debt being sold this week (over $200 billion) than this data.
Tomorrow's key report is July's Consumer Confidence Index (CCI) at 10:00 AM ET. This index measures consumer sentiment, giving us an idea of consumer willingness to spend. This is important because consumer spending makes up two-thirds of the U.S. economy. If the CCI reading is weaker than expected, we may see bond prices rise and mortgage rates drop Tuesday. Current forecasts are calling for a reading of 48.7, which would be a lightly lower reading than June's reading.
Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are Wednesday's 5-year and Thursday's 7-year Note sales, but there are auctions everyday except Friday. The last auctions of the 5-year and 7-year securities were met with very good demand from investors. That led to bond strength following the sales. But this is a record amount of debt being sold this week, so we need to proceed with caution over the next few days. Results of the sales will be posted 1:00 PM ET each day. If investor interest is strong again in Wed nesday and Thursday's sales, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates during afternoon trading those days.
Overall, it likely will be a fairly active week in the mortgage market. With several important economic reports on tap, we will likely see noticeable movement in mortgage rates more than one day. The most important report of the week is Friday's preliminary GDP reading, making it one of the most important days of the week. But it is difficult to say which day we can expect to see the most movement in rates as several of releases and scheduled events have the potential to influence mortgage rates.
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 day s... 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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