Thursday's bond market has opened up sharply following weaker than expected economic news and early stock losses. The major stock indexes are showing sizable losses with the Dow down 134 points and the Nasdaq down 22 points. The bond market is currently up 30/32, which with yesterday's late rally should improve this morning's mortgage rates by approximately .625 of a discount point over yesterday's morning rates.

Today's economic news was quite favorable to the bond markets and mortgage rates. Believe it or not though, neither of the reports were considered to be of high importance to the markets. Therefore, the reaction to the data is somewhat of a pleasant surprise. The first was initial revision to the 4th Quarter GDP reading. Analysts were expecting to see an upward revision of 0.2% from the previous estimate of a 0.6% annual rate of growth. However, today's release showed no change in the reading, keeping it at 0.6%. This means that the economy grew at a slower pace than many had thought. That is good news for bonds and mortgage rates.

The Labor Department gave us today's second release in its weekly unemployment claims data. They said that 373,000 new claims for benefits were filed last week, exceeding forecasts of 350,000 by a wide margin. This supports theories that the employment sector is weakening, easing wage inflation concerns and pointing towards further economic slowing.

Mr. Bernanke spoke to the Senate Banking Committee this morning, but didn't say anything much different than yesterday. I don't believe that his words are having much of an impact on this morning's bond rally.

Tomorrow brings us the release of two relevant reports. The first is January's Personal Income ad Outlays data, which gives us an indication of consumer ability to spend and current spending habits. Current forecasts call for an increase in income of 0.2% while spending is expected to rise 0.2%. Large r increases would be bad news for the bond market and could drive mortgage rates higher. Smaller than expected increases should help push mortgage rates slightly lower tomorrow.

The last piece of data scheduled for release this week is the University of Michigan's revision to their Index of Consumer Sentiment for February. Current forecasts show this index revising slightly higher than previously thought. The preliminary reading was 69.6 and is now expected to stand at 70.0, indicating that consumer sentiment was stronger than previously thought. This index is important because it helps us measure consumer confidence.

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 wo uld 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

 

Friday's bond market has opened up sharply again despite stronger than expected economic data. The stock markets are posting sizable losses with the Dow down almost 200 points and the Nasdaq down 35 points. This has made bonds more attractive to investors as they seek safe-haven from the stock volatility. The result has the bond market up 20/32 and mortgage rates improving another .375 of a discount point.

January's Personal Income ad Outlays data was released this morning, showing a 0.3% rise in income and a 0.4% increase in spending. Both were a little stronger than expected, but have not had a negative impact on bonds or mortgage rates.

The second report of the day was the University of Michigan's revision to their Index of Consumer Sentiment for February. The index was revised higher than was expected to stand at 70.8. However, as with the income and spending report, the news has fortunately had little influence on trading or rates.

Next week is fairly active with economic releases for the markets to digest. It kicks off with Monday's ISM manufacturing index for February. This is an important report and can move the markets and mortgage rates if it varies from forecasts. The week closes with the almighty Employment report Friday morning and between those two are a handful of relevant releases. Look for more details on next week's events in Sunday's weekly preview.

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   

Wednesday's bond market opened in positive territory following weaker than expected economic news. The stock markets are currently showing gains with the Dow up 45points and the Nasdaq up 12 points. The bond market is currently up 5/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.

Both of today's economic reports showed weaker than expected readings. January's Durable Goods Orders fell 5.3% when it was expected to fall 4.0%. Today's release also revealed a downward revision to December's orders of 0.8%. This means that new orders for big-ticket items were weaker than expected in December and January. This is good news for bonds because it points towards slowing economic conditions that ease inflation concerns.

The second report of the day was one of the least important of the week. January's New Home Sales report showed a 2.8% drop in sales of newly constructed homes. This was a larger decline than the 0.8% that was expected. However, because this data is not considered to be of high importance to the bond market, it has not had much of an impact on today's mortgage rates.

In this morning's Congressional testimony by Fed Chairman Bernanke, he renewed concerns about a slowing economy but also warned that inflation is still a significant threat. He also said that the employment and housing sectors could see further weakness. The inflation concern is a problem for bonds- generally speaking. But the other comments about employment, housing and overall economic activity were actually favorable to bonds and mortgage rates. Therefore, I would not be surprised to see further improvements in mortgage rates later today and tomorrow. Accordingly, I have shifted to a float recommendation for all periods.

Mr. Bernanke will be speaking to the Senate Banking Committee tomorrow morning, but is not expected to say anything different than today. Any sign ificant reaction in the markets tomorrow will likely come from an answer given to a specific question to him.

The first of two revisions to the 4th Quarter GDP reading is also scheduled for tomrorow morning. Analysts' forecasts currently call for a 0.8% reading, indicating that the economy was a little stronger in the last quarter of the year than initially thought. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market.

If I were considering financing/refinancing a home, I would.... Float 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 guaran teed to be in the best interest of all/any other borrowers.

©Mortgage Commentary 2008