August 5th, 2008 8:50 AM by Lehel Szucs
Monday's bond market has opened down slight following the release of stronger than expected economic data. The stock markets are also showing losses with the Dow down 18 points and the Nasdaq down 15 points. The bond market is currently down 4/32, which will likely push this morning's mortgage rates higher by approximately .125 - .250 of a discount point.
Today brought us the release of two pieces of economic news. The first was June's Personal Income and Outlays that revealed a 0.1% and a 0.6% rise in spending. Both readings were stronger than expected, indicating that consumers have more money available to spend and are using it. This is bad news for the bond market and mortgage rates because consumer spending makes up two-thirds of the U.S. economy.
The second report of the day was June's Factory Orders. It showed a much larger increase in new orders than was expected. The 1.7% jump in orders was a full percentage point higher than analysts had expected. That means that the manufacturing sector may be strengthening faster than many had thought, which is also bad news for bonds and mortgage pricing.
The rest of week brings us little economic data that is likely to affect mortgage rates. However, we do have the Federal Open Market Committee (FOMC) meeting tomorrow. The meeting will adjourn at 2:15 PM and is expected to yield no change to key interest rates. Usually, the post-meeting comments seem to have more of an influence on the markets than the rate adjustments themselves, or a lack of one in many cases.
Bond traders will be watching the post meeting statement very carefully. Generally speaking, a hint of rate hikes in the future will be construed as an indication that inflation is still a concern and would likely lead to bond selling and increases to mortgage rates. If the statement gives an indication that the Fed is not as concerned with inflation as previously noted, the bond mar ket should rally, leading to lower mortgage rates.
Overall, I am expecting to see a choppy week in trading and mortgage rates. We will likely see the most movement in rates tomorrow with the FOMC meeting. Wednesday's Treasury auction may also affect rates during afternoon trading that day, but I suspect that the rest of the week will be driven by stock market gains or losses.
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... 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