October 13th, 2009 9:59 AM by Lehel S.
Tuesday's bond market has opened well in positive territory following last week's sell-off. The stock markets are helping bonds by showing early losses with the Dow down 38 points and the Nasdaq down 6 points. The bond market is currently up 21/32, but we likely will see little change in this morning's mortgage rates due to weakness late Friday.
There is no relevant economic news scheduled for release today. The bond market was closed yesterday in observance of the Columbus Day holiday, so today's trading picks up from Friday's levels. Last week closed on a significant sell-off so this morning's gains in bonds could be investors finalizing positions. Some traders feel last week's sell-off was overkill, meaning market participants feel current prices are a good buy. This has attracted funds into bonds this morning.
Tomorrow morning brings us the week's first piece of data when September's Retail Sales report is posted. This data is very importa nt to the markets because it measures consumer spending by tracking sales at retail establishments in the U.S. Since consumer spending makes up two-thirds of the U.S. economy, any related data is considered to be highly important. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates should drop. However, stronger than expected sales could fuel a stock rally and push mortgage rates higher. Current forecasts are calling for a 2.1% decline in sales. The large drop from August's sales is expected to come from a significant decline in auto transactions since the Cash for Clunkers program ended.
Also scheduled for release tomorrow is the minutes to the last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over inflation and the Fed's next move. If the Fed members were concerned about inflationary pressures, we may see the bond market move lower and mortgage rates higher Wednesday afternoon. However, if they indicate that inflation is still not a threat and that a rate increase is not likely in the in the bear future, the bond market and mortgage rates should remain calm.
Overall, I am expecting to see a fair amount of movement in mortgage rates this week, but mostly the latter part of the week. The key reports are tomorrow's Retail Sales report and Thursday's CPI data. But the active week for corporate earnings can also heavily influence trading and mortgage rates any day of the week. Accordingly, please proceed cautiously if you have not locked an interest rates yet.
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... Lock if my closing was taking place between 21 and 60 days... Lock 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.