August 25th, 2008 9:06 AM by Lehel Szucs
Monday's bond market has opened in positive territory after the stock markets kicked the week off in selling mode. The stock markets are showing fears of the banking crisis after another bank failed over the weekend. This has the Dow down 127 points and the Nasdaq down 34 points. The bond market is benefiting as investors seek safe-haven in bonds. This has pushed the bond market up 28/32, which will likely improve this morning's mortgage rates by .125 - .250 of a discount point.
Today's only economic data was July's Existing Home Sales report that showed a larger increase in home resales than was expected. This could be considered bad news for bonds and mortgage rates, however, this data is not considered to be of high importance to the markets. Therefore, the stock losses are influencing bond trading more than this data is.
The Conference Board will post this month's Consumer Confidence Index (CCI) at 10:00 AM tomorrow. This index measures co nsumer willingness to spend, which is important because consumer spending makes up two thirds of the U.S. economy. A decline would indicate that consumers may not be making large purchases in the immediate future. That sign of economic weakness should drive bond prices higher, leading to lower mortgage rates tomorrow. It is expected to show a reading of 53.0, which would be an increase from July's 51.9.
Also scheduled for release tomorrow is July's New Home Sales data. This report is the least important release of the week. It will give us an indication of housing sector strength and mortgage credit demand like Monday's Existing Home Sales report does and also usually doesn't have a major impact on bond prices or mortgage rates.
The third and final event for tomorrow is the release of the minutes from the last FOMC meeting. There is a pretty good possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show so me divisiveness by its members. It will be interesting to see some of the Fed member's views on the economy and inflation and if they will hint what the Fed's next move may be.
Overall, it is a shortened week and will probably be a very busy week for mortgage rates. The bond market is expected to close at 2:00 PM ET Friday ahead of the Monday holiday. We will likely see the most activity in rates tomorrow morning, but Wednesday and Thursday are also important. If we manage to get weaker than expected results in the key reports and the Fed minutes don't show any surprises, we should see mortgage rates close the week lower than tomorrow's opening levels.
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 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... T his 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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