July 8th, 2008 10:11 AM by Lehel Szucs
Tuesday's bond market has opened relatively flat again as investors prepare for this week's earnings releases. The stock markets are showing small gains with the Dow up 23 points and the Nasdaq up 7 points. The bond market is nearly unchanged from yesterday's closing level, but we should see an improvement in this morning's mortgage rates of approximately .250 of a discount point due to strength late yesterday.
There is no relevant economic news scheduled for release today. I am expecting the stock markets to continue to be the biggest influence on bond trading the rest of the day. If the major stock indexes remain near current levels, mortgage rates will likely follow suit. However, if stocks continue to move higher, bonds may fall and we could see afternoon upward revisions to mortgage rates. But, if stocks move into negative territory, we may see mortgage rates improve later today.
I am remaining on the cautious side, particularly in the sh ort-term outlooks. I think there is more likelihood of seeing bonds fall and mortgage rates move higher in the immediate future than there is of them improving much. Accordingly, I am holding the lock recommendations for immediate and short-term closings.
This week brings us the release of only two economic reports for the bond market to digest. It also is the beginning of corporate earnings season. Those quarterly earnings reports can lead to significant volatility in the stock markets, which could influence bond trading and mortgage rates.
The first piece of economic news that may affect mortgage rates is Thursday's weekly unemployment figures from the Labor Department. Analysts will be paying a little more attention to this week's release than usual because last week's report showed that claims had crossed above 400,000 the previous week. This is an important benchmark that will be watched closely. Last week's numbers didn't get much attention be cause they were posted at the same time as June's monthly Employment report. But with little data scheduled for release this week, I believe more focus will be made on Thursday's report.
Also worth mentioning are a couple of public speeches by Fed members including Fed Chairman Bernanke and a 10-year Treasury auction of inflation protected notes. The speeches will be watched closely for any possible hint of the Fed's next move. The Treasury auction likely will not have an impact on rates, but could influence bond trading slightly if it is met with a strong or weak demand from investors. In a very light week of economic news such as this week is, events like these sometimes have a greater impact on the markets than if they took place during a busy week of news.
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 cl osing 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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