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Wednesday’s bond market has opened in positive territory again even though
this morning’s only economic data gave us mixed results. The stock markets
are showing early gains with the Dow up 44 points and the Nasdaq up 6
points. The bond market is currently up 7/32, but due to weakness in bonds
late yesterday, we will likely see little change in this morning’s mortgage
rates.
Today’s only relevant economic data was January's Durable Goods Orders
early this morning. The Commerce Department announced that new orders for
big-ticket products fell 5.2% last month, indicating manufacturing sector
weakness. Analysts were expecting to see a 3.5% drop, meaning the sector
was softer than many had thought. That headline number would be good news
for the bond market and mortgage rates. However, a secondary reading that
excludes orders for more volatile transportation-related products such as
airplanes, showed a 1.9% increase when it was predicted to rise only 0.2%.
That reading offsets the headline number, making the data neutral for bond
trading and mortgage pricing.
Day two of Fed Chairman Bernanke’s semi-annual economic update to Congress
is also taking place this morning. He is speaking to the House Financial
Services Committee today, but I don’t believe we will see too much of a
reaction in the markets because his prepared statement should be nearly
identical to yesterday’s opening statement. If we hear anything new, it
will likely come from the Q&A with committee members that will follow.
Later today we will get the results of the 7-year Note auction. Yesterday’s
5-year Note sale was fairly uneventful with many benchmarks used to gauge
investor demand showing an average level of interest. That doesn’t give us
much to be concerned with or optimistic about in today’s 7-year Note sale.
Results of the auction will be posted at 1:00 PM ET, so any reaction will
come during early afternoon hours. I am leaning towards this being a fairly
decent auction, meaning we could see some strength in bonds later today and
possibly another small improvement to pricing.
There are two pieces of economic data scheduled for release tomorrow
morning. The first of two revisions to the 4th Quarter GDP reading is the
more important of the day’s two reports. The GDP is considered the
benchmark measurement of economic activity because it is the total of all
goods and services produced in the U.S. The initial reading usually causes
the most volatility in the markets, but tomorrow’s update could be more
influential than usual. Analysts' forecasts currently call for an annual
rate of growth of 0.5%, up from the initial estimate of a 0.1% decline that
was posted last month. It will be interesting to see where this figure
falls and what its impact on the markets will be. Generally speaking,
higher levels of activity are bad news for the bond market, while no change
or a downward revision would be good news for bonds and could lead to
improvements in mortgage pricing tomorrow.
Also on tomorrow’s calendar is the weekly unemployment update from the
Labor Department. They are expected to say that 360,000 new claims for
unemployment benefits were filed last week, down slightly from the previous
week. Since this data tracks only a single week’s worth of new claims, it
often has little importance to the markets unless it shows a surprisingly
large decline or increase. The higher the number of new claims for
benefits, the netter the news it is for the bond market and mortgage rates
because it would point towards weakness in the employment sector.
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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