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Monday's bond market has opened in positive territory following early stock weakness. The stock markets are ending the month on a negative note with the Dow down 90 points and the Nasdaq down 25 points. The bond market is currently up 6/32, which will likely improve this morning's mortgage rates by approximately .250 of a discount point.

There is no relevant data scheduled for release today, so look for the stock markets to directly affect bond trading and mortgage rates the rest of the day. If the major stock indexes fall further, we may see bond prices rise more and mortgage rates revise lower this afternoon.

The first piece of data comes tomorrow morning with the release of the Institute for Supply Management's (ISM) manufacturing index at 10:00 AM ET. This index measures manufacturer sentiment and is expected to show an increase from last month's reading of 48.9. A reading above 50 means that more surveyed manufacturers felt business improv ed during the month than those who felt it worsened. A larger than expected increase in the index will probably cause a rally in the stock markets and lead to mortgage rates rising tomorrow, while a reading below 50 should lead to lower rates. Analysts are expecting a reading of 50.2, which would be the first reading above 50.0 since January 2008 and indicate that the manufacturing sector is growing.

Overall, I expect to see the most movement in rates Friday, but tomorrow and Wednesday should also be fairly active. Also worth mentioning though is the fact that next Monday is Labor Day so all markets will be closed. The bond market will not close early this Friday, but many traders may head home for the long weekend after Friday's data is posted. This means that trading will likely be thin Friday afternoon even though the markets will still be open. This could lead to additional volatility in rates as traders prepare for the long weekend, so please be careful this week if still floating an interest rate.

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 2009