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Tuesday’s bond market has opened in negative territory, extending
yesterday’s late weakness. Stocks are showing relatively minor gains with
the Dow up 21 points and the Nasdaq up 7 points. The bond market is
currently down 8/32, which should push this morning’s mortgage rates
higher by approximately .250 - .375 of a discount point over yesterday’s
morning pricing. The rally in bonds yesterday morning fizzled during
afternoon trading, causing some lenders to revise pricing higher late in
the day. If your lender did revise higher, you probably will see less of
an increase in this morning’s pricing.
April's Goods and Services Trade Balance was this morning’s only report.
It revealed a $40.3 billion trade deficit that was a little smaller than
forecasted. However, as expected, the data did not have much of an
influence on this morning’s trading and mortgage pricing since it wasn’t
a significant variance in a low importance report. In fact, it is this
week’s least important release and usually does not directly affect
mortgage rates. The data can impact the value of the U.S. dollar versus
other currencies, which indirectly affects bond trading. A stronger
dollar makes U.S securities more attractive to foreign investors as the
proceeds of those securities are worth more when converted to the
investors’ own currency. Still, the results drew little attention in this
morning’s trading.
Tomorrow has three pieces of economic data that are relevant to the bond
market and mortgage rates. The first is the revised 1st Quarter
Productivity and Costs data at 8:30 AM ET tomorrow. This report measures
employee output and employer costs for employee wages and benefits. It is
considered to be a measurement of wage inflation. It is believed that the
economy can grow with low inflationary pressures when productivity is
high. Last month's preliminary reading revealed a 0.7% increase in
productivity and a 0.5% increase in labor costs. Tomorrow’s update is
expected to show a 0.5% increase in the productivity number and a 0.6%
rise in the costs reading. I don't think this piece of data will have
much of an impact on the bond market or mortgage pricing either unless it
varies greatly from expectations.
The second release of the day will come from the Commerce Department, who
will post April's Factory Orders data at 10:00 AM ET. This manufacturing
sector report is similar to last week's Durable Goods Orders release, but
also includes orders for non-durable goods. It can cause some movement in
the financial markets if it varies from forecasts by a wide margin, but
it isn't expected to cause much of a change in rates this month. Current
forecasts are calling for an increase in orders of 1.6%. A smaller increase
would be favorable to the bond market and mortgage rates because it would
indicate the manufacturing was not as stronger as many had thought.
Tomorrow’s final relevant report is the Federal Reserve's Beige Book,
which is named simply after the color of its cover. This report details
economic conditions throughout the U.S. by Federal Reserve region. It is
relied upon heavily by the Fed to determine monetary policy during their
FOMC meetings. If it shows surprisingly softer economic activity since
the last report, the bond market may thrive and mortgage rates could drop
shortly after the 2:00 PM ET release. If it reveals signs of inflation
growing or rapidly expanding economic activity in many regions, we could
see mortgage rates revise higher tomorrow afternoon. It will be
interesting to see if there is any correlation between this data and
yesterday’s surprise decline in the ISM index.
If I were considering financing/refinancing a home, I would.... Lock if
my closing was taking place within 7 days... Float 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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