|
Wednesday’s bond market has opened up sharply following some surprisingly
weak economic data. The stock markets are showing gains with the Dow up 86
points and the Nasdaq up 22 points. The bond market is currently up 15/32,
which should improve this morning’s mortgage rates by approximately .250 of
a discount point.
Today’s big news was the second revision to the 1st Quarter Gross Domestic
Product (GDP) that showed the economy grew at an annual pace of 1.8% during
the first three months of the year. This is the third and final version of
the reading that usually has little impact on the markets. However, this
was surprisingly weaker than the previous estimate of 2.4% and raises
concerns about what this quarter’s reading will show next month. It also
underscores my recent comments about whether the sell-off in the bond
market was based on speculative economic growth that isn’t really
justified.
We also have the first of this week’s two Treasury auctions that have the
potential to affect mortgage-related bonds if they show particularly strong
or weak investor demand. The Treasury will sell 5-year Notes today and
7-year Notes tomorrow. If they are met with a strong demand, we could see
bond prices rise during afternoon trading. This could lead to afternoon improvements
to mortgage rates also. But, if the sales draw a lackluster interest from
investors, mortgage rates may move higher during afternoon trading.
Tomorrow has two pieces of economic data that we will be watching. The
first is the Labor Department’s weekly unemployment update that is expected
to show that 345,000 new claims for unemployment benefits were filed last
week. This would be a decline from the previous week’s 354,000 initial
claims, hinting at employment sector strength. Ideally, the bond market
would prefer to see an increase in new claims, indicating that the sector
weakened instead of strengthened. Since this report tracks only a single
week’s worth of initial claims, it often does not affect mortgage rates.
But, with so much attention on the Fed’s potential tapering of QE3 and its
relation to unemployment, and surprise could have a larger than usually
impact on the bond and mortgage markets.
May's Personal Income and Outlays data is also scheduled for release
tomorrow at 8:30 AM ET. This report gives us an indication of consumer
ability to spend and current spending activity. They are important because
consumer spending makes up over two-thirds of the U.S. economy. If consumer
income is rising, they have more money to spend each month. Analysts are
expecting to see an increase of 0.2% in income and a 0.4% rise in the
spending portion of the report. Declines in both of these readings would be
good news for the bond market and 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... Lock if my closing was taking place between
21 and 60 days... Lock if my closing was taking place over 60 days from
now...
|
No comments:
Post a Comment