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Friday’s bond market has opened in positive territory as yesterday’s hope
of progress in averting a U.S. debt default quickly dwindled late in the
day. The stock markets are not taking the same reverse course as bonds,
extending yesterday’s Dow gain of 323 points. The Dow is currently up 53
points while the Nasdaq has gained 9 points. The bond market is currently
up 7/32, which with yesterday’s late strength should improve this morning’s
mortgage rates by approximately .250 - .375 of a discount point is
comparing to Thursday’s early pricing.
A strong 30-year Bond auction yesterday helped start the rebound in the
broader bond market. Several indicators we use to gauge investor interest
in the sale showed fairly high levels of demand. That was a bit surprising,
but did lead to the bond market almost recovering all of yesterday’s morning
losses. The move was enough to cause many lenders to revise rates slightly
lower during late afternoon trading yesterday, while others may have waited
for this morning’s opening to reflect those improvements. Still, the strong
auction indicates there is still a decent appetite for long-term U.S. debt
securities. That could bode well for mortgage bonds in the near future
also.
The late news that Senate Democrats may not be as willing to agree to a
short-term spending increase that averts a default surprised many traders
and is helping to boost bond prices this morning. The lack of a deal to end
the government shutdown and to raise the debt ceiling so we can continue to
pay bills after October 17 has helped push finds into bonds as a
safe-haven. When news broke yesterday that House Republicans were rumored
to be proposing a short-term patch for the debt ceiling, optimism rose that
progress was being made. That caused some of those safe-haven funds to move
away from bonds and led to yesterday’s sizable stock rally. Now that it
appears such a deal may not pass the Senate, bonds are again benefiting
from the uncertainty. The bad news is that is the tone changes direction
again, we could see another negative day in bonds and increases in mortgage
rates.
We did have some relevant economic data posted this morning from a
non-governmental source that was not affected by the shutdown. Late this
morning, the University of Michigan posted their Index of Consumer
Sentiment for October, announcing a reading of 75.2. This was a decline
from September’s final reading of 77.5 but higher than the 74.5 that was
forecasted. The waning level of consumer sentiment about their own
financial and employment situations is good news because it means that
consumers are less likely to make a large purchase in the near future.
However, since the reading indicated a stronger level of confidence than
what was expected, we need to consider the data neutral-to-slightly
negative for the bond market and mortgage rates.
Next week does have a couple of events that will still take place even if
the government shutdown is not resolved yet. Due to the Columbus Day
holiday Monday, the bond market will be closed as will most banks. However,
the stock markets will be open for trading. There is no early close for
either today ahead of the holiday. 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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