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Thursday’s bond market has opened relatively flat despite the release of
some favorable economic news. The stock markets are showing early gains
with the Dow up 78 points and the Nasdaq up 22 points. The bond market is
nearly unchanged from yesterday’s close, but we should still see an
improvement in this morning’s mortgage rates of approximately .250 - .375
of a discount point due to a rally during late afternoon trading Wednesday.
There were two pieces of economic data posted early this morning. The Labor
Department announced that 354,000 new claims for unemployment benefits were
filed last week, up from the previous week’s 344,000. Analysts were
expecting to see no change in the number of initial claims filed, so we can
consider this data good news for the bond market and mortgage since it
hints at a weaker employment sector than many had thought. However, with
the report tracking only a single week’s worth of new claims, its impact on
today’s mortgage rates has been fairly minimal.
The second report of the morning was the first revision to the 1st quarter
Gross Domestic Product (GDP). It came in with a 2.4% annual rate of growth,
falling just shy of analysts’ forecasts and the previous estimate of 2.5%.
This indicates that the economy grew at a slightly slower pace during the
first three months of the year than previously thought. That is technically
good news for the bond market and rates, although it was not enough of a
change to cause much concern or joy in the markets. Accordingly, it has
also had little influence on today’s mortgage pricing.
Also today is the 7-year Treasury Note auction that has the potential to
affect bond trading and possibly mortgage rates. Yesterday’s 5-year Note
sale went relatively well with several indicators pointing towards a
respectable level of investor demand. Not overly strong or weak. That eases
some concerns about today’s auction. The bond market did improve after
results of the 5-year Note sale were posted yesterday, so as long as we
don’t see a weak interest in today’s auction, we could get further
improvements to mortgage rates after results are released at 1:00 PM ET.
Tomorrow also has two pieces of relevant economic data, both of which have
the potential to move mortgage rates. April's Personal Income and Outlays
data is the first at 8:30 AM ET. It gives us an indication of consumer
ability to spend and current spending habits. An increase in income means
that consumers have more money available to spend. Since consumer spending
makes up over two-thirds of our economy, this data can cause movement in
the financial markets and mortgage rates. Current forecasts are showing a
0.1% increase in income and a 0.1% rise in spending. Weaker readings would
be considered good news for bonds and mortgage rates.
The last relevant data of the week will come from the University of
Michigan, who will update their Index of Consumer Sentiment for May just
before 10:00 AM ET tomorrow. This type of data is watched closely because
when consumers are feeling more confident about their own financial
situations, they are more likely to make a large purchase in the near
future. Rising confidence and the higher levels of spending that usually
follow are considered negative news for bonds and mortgage rates.
Tomorrow's report is expected to show no change from this month's
preliminary reading of 83.7, but it is worth reminding ourselves of the similar
CCI from Tuesday that showed a spike in confidence. A higher reading would
be considered negative for bonds and mortgage pricing.
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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