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Monday’s bond market has opened in positive territory following another bit
of favorable economic news. The stock markets are showing minor gains even
though this morning’s economic data showed weaker than expected results.
The bond market is currently up 8/32, which should improve this morning’s
mortgage rates approximately .250 of a discount point.
July's Durable Goods Orders was this morning’s sole economic report. The
Commerce Department announced early this morning that new orders for
big-ticket items fell 7.3% last month when analysts were expecting to see a
decline of 4.5%. In addition, the report revealed a decline of 0.6% in a
secondary reading that excludes more volatile transportation-related orders
such as new airplanes. Since analysts were expecting a 0.5% increase in
that reading, we can consider both to be good news for the bond market and
mortgage rates because they point towards manufacturing sector weakness.
Today’s economic data has helped extend Friday’s bond rally, improving
mortgage rates again. This morning’s gains have pushed the yield on the
benchmark 10-year Treasury Note down to 2.80%. That is good news for
mortgage shoppers since mortgage rates tend to follow bond yields. I
believe this morning’s data further supports my previous predictions that
the economic data will not portray the level of economic growth that the
Fed envisioned when they started talking about tapering their current bond
buying program back in May and June. These are not key economic reports
that we have seen over the past couple days, but if they are any indication
of what is to come from the major reports that will be released over the
next two weeks leading up to the next FOMC meeting, it will be difficult
for the Fed to justify tapering at this time. This is why the stock markets
have reacted positively to the same weaker economic data that is boosting
bonds.
The rest of the week has four more economic reports scheduled for release
that are relevant to mortgage rates in addition to two Treasury auctions
that can potentially affect rates. There is data being posted each day this
week except for Wednesday, but none of the reports are considered to be
highly important. Still, most of the week’s releases carry enough
significance to affect mortgage rates if their results vary from forecasts,
as we have seen this morning.
Tomorrow also has only one report worth watching. The Conference Board will
post their Consumer Confidence Index (CCI) for August at 10:00 AM ET
tomorrow. This index measures consumer sentiment about their personal
financial situations, which helps us measure consumer willingness to spend.
If consumers are feeling more confident in their own finances, they are
more apt to make a large purchase in the near future, fueling economic
growth. A decline in confidence would indicate that surveyed consumers
probably will not be buying something big in the immediate future. That would
be a sign of economic weakness and should drive bond prices higher, leading
to lower mortgage rates again tomorrow. It is expected to show a reading of
77.0, which would be a decline from July's 80.3. The lower the reading, the
better the news for bonds and mortgage rates.
Overall, I am expecting to see the most movement in rates Thursday or
Friday, but today’s move was noticeable also. Wednesday looks to be the
lightest day with nothing of importance scheduled except the moderately
important Treasury auction. Even though none of this week’s economic data
is considered to be a market mover, we still should see plenty of activity
and movement in rates. Therefore, please proceed cautiously if still
floating an interest rate and closing in the near future.
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...
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