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Wednesday’s bond market has opened flat with nothing of significance being
released today. The stock markets are showing relatively minor losses with
the Dow down 7 points and the Nasdaq down 22 points. The bond market is
currently down 3/32, which will likely keep this morning’s mortgage rates
close to yesterday’s pricing.
There is not much new to report regarding the government shutdown or the
likelihood of a resolution anytime soon other than the chorus of outrage is
rising louder. We did get a bit of important news last night, but it really
was not a surprise to many people. President Obama officially announced his
nomination to take over as Fed Chairman when current chairman Bernanke’s
term ends early next year. His nomination of Fed Vice Chairman Janet Yellen
was widely expected ever since Lawrence Summers removed himself from
consideration last month. There appeared to be no other likely candidate,
so this announcement was more of a formality than anything else. The
markets responded positively to the news when Mr. Summers made his
announcement last month, therefore, we are not seeing much of a reaction in
today’s trading. It is believed that Ms. Yellen’s beliefs are much more
"bond market friendly" than Mr. Summers’, which is why we saw a positive
reaction last month.
We do have two things taking place today that have the potential to affect
bond trading and mortgage rates. The first of this week’s two important
Treasury auctions is today. 10-year Notes are being sold today while
30-year Bonds will be sold tomorrow. If the sales are met with a lackluster
interest from investors- particularly international buyers, the bond market
may move lower after the results are posted and mortgage rates may move
higher. It is difficult to believe that there will be a strong demand for
these securities with the current situation in Washington D.C. The results
will be announced at 1:00 PM each sale day, so any reaction will come
during afternoon trading.
The minutes from the most recent FOMC meeting will also be posted this
afternoon. These may be a major mover of the markets or could be a
non-factor, depending on what they say. However, with little else being
posted this week they will likely be more influential than usual. The keys
will be concerns over the economy, inflation and the Fed's next monetary
policy move. If Fed members were concerned about the economy continuing to
grow, we may see the bond market move higher and mortgage rates lower
during afternoon trading. It will be interesting to see how much debate and
disagreement amongst members took place during the meeting, particularly
about tapering QE3.
We do have a piece of economic data to look for tomorrow. Last week’s
unemployment figures will be posted at 8:30 AM ET tomorrow. Analysts are expecting
to see 318,000 new claims for unemployment benefits were filed last week,
up from the previous week’s 308,000. The larger the number of initial
claims, the better the news it is for the bond and mortgage markets because
rising claims indicates a softening employment sector and restricts broader
economic growth.
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... Float 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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