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Wednesday’s bond market has opened flat despite favorable economic data and
an uneventful open in stocks. The major stock indexes are nearly unchanged
from yesterday’s close, as is the bond market. We will still likely see a
slight improvement in this morning’s mortgage rates, but that is due to
strength in trading late yesterday and not a result of this morning’s
economic news.
The Commerce Department announced early this morning that new orders for
durable goods rose just 0.1% last month, falling short of the 0.5% that was
expected. In addition, a secondary reading that tracks orders with larger
transportation items excluded such as new airplanes, fell 0.1% when
analysts were expecting to see a 0.9% increase. Also worth noting are
somewhat sizable downward revisions to July’s readings. That news indicates
the manufacturing sector was not as strong as many had thought, making the
data favorable for the bond market and mortgage rates. However, the
variance in the overall reading wasn’t enough to cause much alarm because
the data is known to be quite volatile from month to month. Unfortunately,
that has prevented a strong opening in the bond market despite the fact
that this was the week’s single most important economic release.
They also gave us today’s second piece of economic data with the release of
August's New Home Sales at 10:00 AM ET. It revealed a 7.9% increase in
sales of newly constructed homes last month that exceeded forecasts,
hinting at strength in the new home portion of the housing sector. That
technically makes the data bad news for mortgage rates, but since this
report does not carry a high level of significance in the markets, its
impact on today’s trading and mortgage pricing has been minimal.
The Treasury is selling 5-year Notes today and 7-year Notes tomorrow. These
sales have the potential to influence broader bond trading and possibly
mortgage rates, but they won’t be the cause of a significant move in
pricing. At the most, a strong demand from investors will lead to a small
improvement in rates while a weak demand could cause a minor upward
revision to pricing. Results of today’s sale will be posted at 1:00 PM ET,
so any reaction will come during early afternoon trading.
Tomorrow also has two pieces of economic data scheduled to be posted that
may have an impact on mortgage rates. The first is the weekly unemployment
update from the Labor Department at 8:30 AM ET. They are expected to
announce that 325,000 new claims for unemployment benefits were filed last
week, up from the previous week’s 309,000. The larger the number of initial
claims, the better the news it is for the bond and mortgage markets because
rising claims indicates employment sector weakness. Although, there is
little faith in this week’s numbers because of technical difficulties in
the reporting process from Nevada and California over the past couple
weeks. In other words, we really can’t rely on the numbers to accurately
reflect a weekly snapshot of the employment sector. Therefore, I would be
surprised if tomorrow’s release has any influence on mortgage rates.
The final revision to the 2nd Quarter Gross Domestic Product (GDP) will
also be posted early tomorrow morning. Since this data is aged now and the
preliminary reading of the 3rd Quarter GDP will be released next month, I
don't see this revision having much of an impact on the financial markets
or mortgage pricing. The GDP is important because it is the total sum of
all goods and services produced within the U.S. and is considered the best
measurement of economic activity. It is expected to show a 0.1% upward
revision from the previous estimate of a 2.5% increase in the GDP. It will
take a fairly large revision for this data to move mortgage rates, but the
lower the reading, the better the news it is for 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... Float if my closing was taking place over 60 days from
now...
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