Todays market commentary rates upward

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Tuesday’s bond market has opened down sharply due to an early rally in stocks and stronger than expected economic news. The stock markets are starting the holiday-shortened week in rally mode with the Dow up 203 points and the Nasdaq up 47 points. The bond market is currently down 29/32, which is going to push this morning’s mortgage rates higher by approximately .625 - .750 of a discount point over Friday’s pricing. The Conference Board gave us today’s only economic news but it surely didn’t help us at all. They announced that their Consumer Confidence Index (CCI) rose to 76.2 this month, exceeding forecasts of 72.5. This was a sizable jump from April’s 68.1 and the highest reading since February 2008. That makes the data negative for the bond market and mortgage rates because rising confidence means that consumers are more likely to make large purchases in the near future, fueling economic growth. This morning’s unfavorable data is the only reason for today’s early bond selling and spike in mortgage rates. The bond market was already showing significant weakness before the data was posted at 10:00 AM ET. Therefore, we can consider this an extension of the general negative tone in the bond market that has caused bond yields to rise so rapidly. The benchmark 10-year Treasury Note is currently at 2.10%. The more it moves away from 2.00%, the less likely we will see mortgage rates recover even a small portion of their recent increases in the immediate future. Tomorrow has nothing scheduled that is expected to affect mortgage rates except the first of this week’s two Treasury auctions that are worth watching. The Fed will auction 5-year Notes tomorrow and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors that brings more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours tomorrow and Thursday. Overall, it appears that today may have been the most important day of the week for mortgage rates after all. Following the holiday weekend, stocks are moving much higher while bonds are in the tank. That equates to another jump in mortgage rates, unfortunately, with little to look forward to for relief. We do have the revised GDP reading Thursday, but unless that shows a significant downward revision it will probably not be of much help. Friday has some fairly important economic data scheduled for relief, however, none of it is considered to be of market-moving importance. The best scenario for a sizable improvement in mortgage rates would be a huge stock sell-off that would erase several hundred points from the Dow. As long as stocks remain in positive ground, it will be difficult for bonds and mortgage rates to gain any traction the next several 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