Our Real Estate Blog

Mortgage Rates (9/14/2010)

September 14th, 2010 8:43 AM by Lehel S.

Tuesday's bond market has opened in well in positive territory even though this morning's economic data showed results that weren't so favorable for bonds. The stock markets are relatively calm considering this important data could have led to a sizable rally in stocks. The Dow is currently up 15 points while the Nasdaq has gained 5 points. The bond market is currently up 17/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.

The Commerce Department reported early this morning that retail level sales rose 0.4% last month, slightly exceeding analysts' forecasts. In addition, if more volatile auto-related transactions were excluded, sales rose 0.6%. That was twice what analysts had expected and indicates consumers spent much more in August than many had thought. You couldn't tell by the reaction this morning, but this was actually bad news for bonds and mortgage rates. The larger than expected increases indica te that consumers are spending more, which fuels economic activity. Still, a positive day in the bond market is a good day for mortgage rates. Fortunately, traders weren't too concerned about the data.

August's Industrial Production report will be posted mid-morning tomorrow. This moderately important data gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. If there is a significant difference between forecasts and the actual reading, it may influence mortgage rates tomorrow. Analysts are expecting to see a 0.3% increase in production. A higher level of output could lead to higher mortgage rates, while a weaker than expected figure would hint at a soft manufacturing sector and would be considered good news for bonds and mortgage rates.

The first of this week's two important inflation readings will posted early Thursday morning. August's Producer Price Index (PPI) will give us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting a 0.3% increase in the overall index, and a rise of 0.1% in the core data. Stronger than expected readings could fuel inflation concerns in the bond market Thursday. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond's future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leading to falling prices and higher mortgage rates.

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... 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. 
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Posted by Lehel S. on September 14th, 2010 8:43 AM

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