Friday’s bond market has opened relatively flat following mixed results
from today’s economic data. The stock markets are very calm with the Dow
nearly unchanged from yesterday’s close while the Nasdaq is up 4 points.
The bond market is currently down 2/32, but I don’t believe we will see a
noticeable difference in this morning’s mortgage rates.
July's Housing Starts was the first of this morning’s three economic
reports. The Commerce Department announced at 8:30 AM ET that new housing
construction starts rose 5.9% last month. This was a smaller percentage
increase than was expected by analysts, but the number of starts was
close to forecasts. The difference came in an upward revision of 10,000
to June’s previously announced 836,000 starts. In other words, the number
of projects started in July was pretty much what many had expected
although the percentage upward was smaller than thought. That makes the
data relatively neutral for the bond market and mortgage rates. It was
still a fairly large jump, indicating housing sector strength, so it
could be construed as slightly negative by some traders.
The second report of the morning also came at 8:30 AM when Employee
Productivity and Costs data for the second quarter was released. The
Labor Department posted a much stronger than predicted reading of up
0.9%. Analysts were calling for no change from the first three months of
the year. Therefore, the headline number is actually good news for the
bond market and mortgage rates. Unfortunately, the second reading that is
closely watched tracks labor costs and it revealed a 1.4% increase that
greatly exceeded forecasts. The cost reading raises wage-inflation
concerns and hints that consumers may have more money to spend, fueling
economic growth. However, the mixed results offset each other, which
prevented the markets from reacting to the data in a positive or negative
way.
Late this morning, the University of Michigan posted their Index of
Consumer Sentiment for August. They announced a reading of 80.0 that fell
well short of analysts’ forecasts. It was expected to come in with little
change from July’s 85.1. What this means is that surveyed consumers were
much less optimistic about their own financial situations than many had
thought. That makes the data favorable for the bond and mortgage markets
because waning confidence usually means consumers are less likely to make
a large purchase in the near future, limiting economic growth. This news
has helped to keep the bond market close to yesterday’s level, at least
during early trading. It has been common for bonds to weaken during
Friday afternoon trading, so proceed cautiously as we head into the
weekend.
Next week is pretty light in terms of the number of economic reports and
other events scheduled for release. There are only a couple releases
scheduled and the primary theme of those is housing sector data. We will
also get the minutes from the most recent FOMC meeting in the middle of the
week. There is nothing of importance scheduled for Monday, so we can
expect weekend news and early stock movement to help set the tone early
in the week. Look for details on next week’s calendar 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... Lock if my closing was
taking place between 8 and 20 days... Lock 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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