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Friday’s bond market has opened in positive territory even though this
morning’s economic data gave us mixed results. The stock markets are
showing minor gains with the Dow up 30 points and the Nasdaq up 7 points.
The bond market is currently up 6/32, which with afternoon strength
yesterday should improve this morning’s mortgage rates by approximately
.250 of a discount point if comparing to Thursday’s morning pricing.
Yesterday’s 30-year Bond auction went a little better than Wednesday’s
10-year Note sale did, but it we didn’t see an overwhelmingly strong level
of investor demand. Some indicators showed decent strength while other did
not. Still, we saw afternoon buying in bonds that caused some lenders to
improve their pricing late in the day.
June's Producer Price Index (PPI) was the first of this morning’s two
relevant economic releases. The Labor Department announced early this
morning that the overall PPI rose 0.8% while the core data rose 0.2% last
month. Analysts were expecting to see 0.3% and 0.1% increases respectively,
indicating that inflationary pressures were stronger at the producer or
manufacturing level of the economy than many had thought. That is bad news
for the bond market and mortgage rates because rising inflation erodes the
value of a bond’s future fixed interest payments, making them less
appealing to investors. Fortunately, the data has not caused much concern
in this morning’s trading.
Late this morning, the University of Michigan released their Index of
Consumer Sentiment for July. It came in at 83.9, slightly lower than June’s
final reading of 84.1. That was also lower than forecasts of 85.0, meaning
surveyed consumers were less optimistic about their own financial and
employment situations. This considered good news for the bond and mortgage
markets because waning confidence usually means consumers are less likely
to make a large purchase in the immediate future, limiting economic growth.
While this is favorable data for mortgage rates, it isn’t the cause of this
morning’s improvements. Bonds were in positive ground before this report
was released at 9:55 AM ET.
Next week is going to be another active week for the broader financial
markets and mortgage rates. Besides the release of some very important
economic data early in the week, Fed Chairman Bernanke will be making his
semi-annual appearance before two Congressional finance committees the
middle part of the week. Monday has one of the more important economic
reports we get each month with the release of June’s Retail Sales at 8:30
AM ET that measures consumer spending. It will be followed by the release
of June’s Consumer Price Index (CPI) Tuesday morning. Look for details on
next week’s calendar in Sunday’s weekly preview.
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... Lock 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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