Monday’s bond market has opened flat despite sizable stock gains during early
trading. The stock markets are starting the week off well in positive
ground with the Dow up 167 points and the Nasdaq up 34 points. The bond
market is currently unchanged from Friday’s close, but you still may see a
slight increase in this morning’s mortgage rates if your lender did not
revise higher late Friday. This is because the bond market gave back some
of its morning gains during Friday afternoon trading.
There was nothing of importance posted this morning, so we are left mostly
to stock movement for bond and mortgage rate direction today. The rest of
the week brings us the release of only four pieces of economic data that is
relevant to mortgage rates, but one of them is a key inflation reading that
is very important to the bond market. The theme of the week will be
Fed-related though with an FOMC meeting, economic forecasts and a press
conference with Fed Chairman Bernanke all set for Wednesday.
May's Consumer Price Index (CPI) will be posted early tomorrow morning,
giving us a very important measurement of inflationary pressures at the
consumer level of the economy. As with last week’s Producer Price Index
(PPI), there are two readings that analysts watch. Forecasts are calling
for 0.2% rise in the overall reading and a 0.1% increase in the core data.
The core reading is the more important of the two because it excludes more
volatile food and energy prices, leaving a more stable measure of
inflation. Indexes like this are important to the bond market and mortgage
rates because rising inflation makes a long-term security’s future interest
payments less valuable to investors. That leads them to be sold at a
discount, causing yields and mortgage rates to move higher. Therefore, we
would like to see weaker than expected readings, indicating inflationary
pressures are softer than analysts are thinking. The weaker the readings,
the better the news it is for mortgage rates.
Also being released at 8:30 AM ET tomorrow is May’s Housing Starts. This
data tracks construction starts of new home projects. It is the week's
least important report and likely will not affect mortgage rates unless its
results vary greatly from forecasts. It is expected to show that starts of
new homes rose noticeably last month, indicating strength in the housing
sector. That is basically bad news for the bond market and mortgage rates
because a weak housing sector makes a broader economic recovery less
likely. However, this data is not important enough to cause a noticeable
change in mortgage rates unless the CPI matches forecasts and this report
shows a significant surprise.
Overall, look for Wednesday to be the most active day for mortgage rates,
but we will likely also see a fair amount of movement tomorrow. Friday has
nothing of low or high importance scheduled, so we should see a fairly calm
day for rates. For the week, I would be surprised if we did not see plenty
of movement in rates although the biggest moves will probably take place
the middle days. Please maintain contact with your mortgage professional if
still floating an interest as the markets can become extremely volatile at
any time.
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...
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