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Friday’s bond market has opened in positive ground following the release of
three economic reports that gave us mostly favorable results. The stock
markets are mixed with the Dow up 32 points and the Nasdaq down 12 points.
The bond market is currently up 5/32, which should improve this morning’s
mortgage rates by approximately .125 of a discount point.
Yesterday’s 30-year Treasury Bond auction went fairly well but not nearly
as strong as Wednesday’s 10-year Note sale did. A couple of the indicators
we use pointed towards a decent level of interest from investors, but not
overwhelmingly strong. Others showed average results that were close to
recent auctions. The news didn’t have much of an impact on bond trading
yesterday afternoon.
There were three pieces of economic data posted this morning that were
relevant to mortgage rates. The first was the highly important Retail Sales
data from the Commerce Department. They announced early this morning that
retail-level sales rose only 0.2% last month when analysts were expecting
to see a 0.4% increase. Even the secondary reading that tracks sales
excluding more volatile auto transactions came in light (up 0.1% versus
0.3%). Since that indicates consumers spent less than expected last month,
we should consider the data good news for the bond market and mortgage
rates. However, an upward revision to July’s sales has limited the reaction
to August’s numbers.
The Labor Department posted August's Producer Price Index (PPI) at 8:30 AM
ET this morning also, revealing a 0.3% increase in the overall reading and
no change in the core data. Analysts were predicting a 0.2% rise in the
overall reading, so we should consider it slightly negative for mortgage
rates. However, forecasts were calling for a 0.1% increase in the more
important core reading that excludes volatile food and energy prices, mean core
inflationary pressures were softer than many had thought. Therefore, we are
looking at the results as neutral-to-slightly positive for the bond and
mortgage markets.
Today’s third and the week’s final piece of relevant data came from the
University of Michigan late this morning. They announced that their Index
of Consumer Sentiment fell from 82.1 in August to 76.8 this month. What
this means is that fewer surveyed consumers were optimistic about their own
financial situations than in August. That is clearly good news for the bond
market and mortgage pricing because waning consumer confidence usually
translates into weaker levels of consumer spending that makes up such a
hefty part of our overall economy. Weakening confidence in job stability
and general financial situation means a consumer is less likely to make a
large purchase in the near future, limiting economic growth.
Next week is going to be interesting to say the least. There is economic
data set for release Monday that can influence mortgage rates, although it
is not a highly important report (August’s Industrial Production). There
are more important reports also scheduled for release during the week,
however all eyes will be focused on the two-day FOMC meeting that will
adjourn Wednesday and will be followed by revised Fed economic forecasts
and a press conference with Chairman Bernanke. Look for details on next
week’s events in Sunday’s weekly preview, but a spoiler alert…… Wednesday
is the key day of the week, month, quarter and possibly the year due to the
expectations of the Fed reducing or tapering their current monthly bond
purchase program.
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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