Monday update

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Monday’s bond market has opened up slightly following early stock losses. The major stock indexes are retreating away from last week’s record levels with the Dow down 87 points and the Nasdaq down 21 points. The bond market is currently up 2/32, which will likely keep this morning’s mortgage rates close to Friday’s levels or possibly slightly lower. There is nothing of importance scheduled for release today, so any changes to mortgage rates intra-day will probably come from stock movement. The rest of the week brings us the release of five economic reports that have the potential to affect mortgage rates. In addition, we have a bunch of corporate earnings releases that can significantly impact the stock markets and help direct funds into or away from mortgage-related bonds. Tomorrow has three of the week’s five reports, beginning with March's Consumer Price Index (CPI) at 8:30 AM ET tomorrow. This index is one of the most important pieces of data we see each month. It is similar to last week's PPI but measures inflationary pressures at the consumer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors, leading to bond selling and higher mortgage rates. There are two readings in the index that traders watch- the overall and the core data that excludes more volatile food and energy prices. Analysts are expecting to see a 0.1%decline in the overall readings and a 0.2% rise in the core reading. The core data is the more important reading, which ideally will show a decline in prices at the consumer level. March's Housing Starts is the next report, also coming early tomorrow morning. It gives us a measurement of housing sector strength and mortgage credit demand by tracking starts of new home construction and the number of permits issued for future starts. This data usually doesn't cause much movement in mortgage pricing unless it varies greatly from forecasts. It is expected to show a small increase in construction starts of new homes. Good news for the bond market and mortgage rates would be a decline in home starts, indicating housing sector weakness. The third report of the day is March’s Industrial Production data that will be posted at 9:15 AM ET. It tracks output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Current forecasts are calling for an increase in production of 0.3%. This data is considered to be only moderately important to rates, so it will take more than just a slight variance to influence bond trading and mortgage pricing. Signs of manufacturing sector strength are considered negative news for mortgage rates, so a decline in output would be good news for the bond market and mortgage shoppers. Overall, it will likely be a moderately active week for mortgage rates. However, unlike many weeks, the most important news comes earlier in the week. I am labeling tomorrow as the most important due to the data that is scheduled and Friday appears to be the best candidate for the least active day. The stock markets could also heavily influence bond trading and mortgage pricing any day this week as we get more corporate earnings releases. I don’t think this will be one of the more active weeks in terms of mortgage rate movement, although we should see minor changes a couple days. 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...       Alan Russell 161 South San Antonio Rd. | Los Altos, CA 95022 Ph: 650-947-2296 | Fax: 408-335-1118 alanrussell@princetoncap.com CLICK HERE TO STOP RECEIVING OUR REPORT