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Tuesday’s bond market has opened in negative territory following
encouraging news out of Washington D.C. over the long weekend. The stock
markets are showing losses as they were able to react to that same news
during trading yesterday. The Dow is currently down 76 points during early
trading while the Nasdaq has lost 10 points. The bond market is down 4/32,
which with Friday’s afternoon weakness should push this morning’s mortgage
rates higher by approximately .250 of a discount point if comparing to
Friday’s morning pricing.
There is no relevant economic data scheduled for release today. There were
a handful or reports that were set to be posted this week, but several of
them will be delayed due to the government shutdown. It will prevent
September’s Consumer Price Index (tomorrow), Housing Starts and Industrial
Production reports (Thursday) from being released. The CPI measures
inflation at the consumer level of the economy, so it is considered very
important to the bond market and will be missed. The other two releases are
generally considered to be moderately important to the bond and mortgage
markets but still can affect mortgage rates if they show significant
surprises.
This morning’s bond weakness is mostly a result of rumors of progress in
Washington that may end the 15-day shutdown in the immediate future and
push back the debt ceiling issue until early next year. It appears that the
parties are considering a deal that they all can live with, but it is too
soon to consider it a sure thing. Therefore, we should remain cautious
towards the markets and mortgage rates and expect to see some volatility as
news evolves on the matter. Generally speaking, a resolution would be
negative for bonds and mortgage rates and positive for stocks. If a hurdle
pops up that makes the deal less likely to pass the House, Senate and White
House, then bonds should strengthen enough to improve mortgage pricing.
The Fed Beige Book is one of the reports that we should get regardless of
the shutdown status because the Fed is self-funded. It will be posted at
2:00 PM ET tomorrow, so any reaction will come during afternoon trading.
This report is named simply after the color of its cover and details
economic conditions throughout the U.S. by Fed region. Its’ contents are
relied upon heavily by the Federal Reserve when determining monetary policy
at their FOMC meetings. If it reveals stronger or noticeably weaker signs
of economic growth from the last release, we could see bond prices move and
mortgage rates revise tomorrow afternoon. Signs of stronger growth would be
negative for rates while much weaker conditions than the previous release
would be favorable for the bond market and mortgage shoppers.
Overall, look for news out of Washington to be the biggest influence on
bond trading and mortgage rates since we will not be getting some of the
regularly-scheduled economic data. Partly because a resolution appears to
be possible in the immediate future, I believe there is much more risk by
floating an interest rate than potential reward if closing in the next
couple weeks. Therefore, please proceed cautiously if still floating a rate
and maintain contact with your mortgage professional, especially until we
see an end to the stalemate in Congress.
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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