September 4th, 2008 1:16 PM by Lehel Szucs
Thursday's bond market has opened on positive territory following another round of early stock losses. The stock markets are posting sizable losses during early trading with the Dow down 220 points and the Nasdaq down 40 points. The bond market is currently up 7/32, which with yesterday's late gains should improve this morning's mortgage rates by approximately .250 - .375 of a discount point.
Yesterday afternoon's release of the Fed Beige Book report indicated that the economy continues to slow and that inflationary pressure still remain elevated. Neither of those points really come as a surprise, but the comments about the economy slowing and words used such as soft and weak, helped bonds prices to move higher yesterday afternoon.
The 2nd Quarter Productivity numbers were posted this morning, showing a surprising jump in worker output. The 4.3% rise was well above forecasts and is good news for bonds and mortgage rates because higher levels of p roductivity allow the economy to grow without inflation fears.
The Labor Department reported that 444,000 new claims for unemployment benefits were filed last week. This was a sizable increase from the previous week, especially when analysts were expecting to see a decline in claims.
The Labor Department will also post August's Employment report tomorrow morning. This report will give us the unemployment rate, number of new jobs added or lost and average hourly earnings during August. The ideal scenario for the bond market and mortgage rates is rising unemployment, a smaller than expected rise in new payrolls and earnings to remain unchanged. If we are that fortunate, I expect to see mortgage rates drop considerably tomorrow morning. Analysts are expecting to see the unemployment rate remain at 5.7% and 75,000 jobs lost in the month. Weaker then expected readings would be very good news for bonds and mortgage rates.
If I were considering f inancing/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