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August 30, 2007

Thursday's bond market has opened in positive territory after this morning's economic news failed to show any negative surprises. The stock markets are mixed with the Dow down 17 points and the Nasdaq up 15 points. The bond market is currently up 9/32, but we will still see an increase in this morning's mortgage rates of approximately .250 of a discount point due to weakness in bonds late yesterday. During late afternoon trading yesterday, bonds fell as the major stock indexes rallied.

The Commerce Department said this morning that the Gross Domestic Product (GDP) actually stood at a 4.0% annual rate during the 2nd Quarter. This was a sizable upward revision from the previous estimate, but matched forecasts. Also, a key inflation reading in the report remained at its previous estimate, which had been well below what analysts had expected when the initial estimates were posted last month. The lack of an upward change to that reading has helped boost bond prices this morning.

The Labor Department said that 334,000 new claims for unemployment benefits were field last week. This was well above the 320,000 that were expected. Unfortunately, this data is not look at as important, so its impact ton bonds and mortgage rates was minimal.



Tomorrow brings us the release of three pieces of economic news. They are July's Personal Income and Outlays, Factory Orders and the University of Michigan Index of Consumer Sentiment posting. The income and spending data measures consumer ability to spend and current spending habits. It is expected to show an increase of 0.3% in income and a 0.3% increase in spending. Weaker than expected numbers would be good news for the bond market and mortgage rates.

The second report of the day is July's Factory Orders data. This report measures manufacturing sector strength and is similar to last week's Durable Goods Orders, but includes orders for both durable and non-durable goods. This data is expected to show a 3.0% increase in new orders. A smaller than expected rise should lead to lower mortgage rates tomorrow, especially if the income and spending report reveals weaker than expected readings.

August's revision to the University of Michigan Index of Consumer Sentiment is also due tomorrow morning. It gives us a measurement of consumer willingness to spend. It is expected to show a slight downward revision from August's preliminary reading of 83.3. If it revises lower, consumers were less confident about their personal financial situations than previously thought. This would be good news for the bond market and mortgage rates.

Also worth noting is an early close in the bond market ahead of Monday's Labor Day Holiday. The bond market will close at 2:00 PM tomorrow while the stock markets should be open all day. The stock and bond markets will be closed Monday and will reopen Tuesday morning. This could lead to additional volatility in the markets, and possibly mortgage pricing, as investors prepare for the long holiday.

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... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Friday's bond market has opened in negative territory after this morning's economic news showed stronger than expected results. The stock markets have reacted favorably to the data with the Dow up 115 points and the Nasdaq up 20 points. The bond market is currently down 5/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point.

This morning's first piece of news was July's Personal Income and Outlays data. It showed stronger than expected results with a 0.5% rise in income and a 0.4% increase in spending. Analysts had forecasted 0.3% increases in both readings, meaning that consumers' ability to spend and actual spending were both higher than thought. This is bad news for bonds and mortgage rates.

The second release was July's Factory Orders data that showed a 3.7% rise in new orders. The third piece of data was the revision to the University of Michigan Index of Consumer Sentiment for August. It revealed a reading of 83.4, which was close to the initial estimate of 83.3. Both of these reports showed slightly higher than expected readings, indicating that economic activity was stronger than thought.

Fed Chairman Bernanke made a speech this morning that traders were watching closely. However, as expected, he didn't tell us anything we really didn't know already. Key points were that the housing sector is expected to continue to weaken and that the Fed was ready to act if needed. This was the opinion of many analysts and traders already, so his words haven't had a significant impact on the markets this morning.

The bond market will close at 2:00 PM this afternoon ahead of Monday's Labor Day Holiday. The stock and bond markets will be closed Monday in observance of the holiday and will reopen Tuesday morning.

Next week brings us the release of a couple of key economic reports, beginning with Tuesday's ISM manufacturing index. The week's agenda also includes productivity numbers and the almighty Employment report. Look for more details on next week's activities 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... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.