July 7th, 2009 8:06 AM by Lehel Szucs
Monday's bond market has opened in negative territory despite early stock losses. The stock markets are starting the week with minor losses as concerns over this week's events prevent gains in the major indexes. The Dow is down 51 points while the Nasdaq has lost 23 points. The bond market is currently down 8/32, which should push this morning's mortgage rates higher by approximately .125 of a discount point over Thursday's morning rates.
There is no relevant economic news scheduled for release today. This week brings us the release of only two monthly economic reports and they both will be posted Friday. It also is the beginning of corporate earnings season that can lead to significant volatility in the stock markets and has the potential to influence bond trading and mortgage rates.
There are a couple of Treasury auctions that are scheduled to take place this week, beginning with the 10-year TIPS (Treasury Inflation Protected Securities) today . This sale isn't exactly the most important auction of the week, but with no relevant data being posted until later in the week it may influence bonds and possibly mortgage rates if we see a very strong or extremely poor demand from investors. Results will be posted at 1:00 PM ET, so any change in rates from this event would come during afternoon hours.
Wednesday kicks off the earnings season when Alcoa posts their quarterly results. Market participants are anxiously waiting for these results to see just how hard the weak economy is affecting earnings. Just as important as this past quarter's results are their forward-looking estimates. If revenue, earnings and projections from the big-named companies exceed expectations, stocks will likely rally, making bonds less appealing to investors. But if results are weaker than expected, indicating that the economy is still stifling earnings, bonds will be more attractive to investors as stocks slide. This could hel p boost bond prices and lead to lower mortgage rates.
Overall, I am expecting to see a fairly active week in mortgage rates. It is difficult to say which day will be the most important of the week. Friday is the easy candidate with two monthly reports scheduled to be posted, but neither is considered to be a major release. Wednesday is also a possibility due to the 10-year Note auction and the opening act of earnings season. I suspect that we may see some pressure in bonds the first part of the week unless the major stock indexes continue Thursday's selling. If the corporate earnings reports that are scheduled for this week are a disappointment, stocks will probably move lower and investors may seek safe-haven in bonds. This would help push bond prices higher and mortgage rates lower for the week. But if the Treasury sales are met with a lackluster demand and earnings exceed expectations, rates will most likely finish the week higher than last week's closing l evels.
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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