Thursday’s bond market

 

 

 

Thursday’s bond market has opened in negative territory despite weaker than expected economic news. The stock markets have reacted negatively to the news with the Dow down 112 points while the Nasdaq has fallen 37 points. The bond market is currently down 9/32, which will likely push this morning’s mortgage rates higher by approximately .250 - .375 of a discou nt point.

The Commerce Department posted April’s Retail Sales data early this morning, showing a 0.5% rise in orders. Forecasts had called for an increase of 0.8%, meaning that consumer spending was not as strong last month as expected. This is very good news for the bond market, but it has been ignored as investors digest yesterday’s FOMC results.

Yesterday’s FOMC meeting adjourned with an announcement of another quarter point increase to key short-term interest rates, as expected. The post-meeting statement led to inflationary fears that have carried into this morning’s trading. The Fed statement indicated that more rate hikes might be needed, depending on future economic data. This was not what analysts were expecting to hear. They wanted a stronger hint that the end is near for the increases and inflation was in-check.

Results of today’s 10-year Note auction will be posted at 1:30 PM ET. If it was met with a strong demand from investors, we c ould see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, a weak demand could lead to higher mortgage pricing.

Tomorrow brings us the release of two pieces of economic data. The first is March’s Goods and Services Trade Balance report will be released. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing.

The second report of the day is May’s preliminary reading to the University of Michigan Index of Consumer Sentiment. This index measures consumer willingness to spend and usually has a pretty big impact on the financial markets. It is expected to show a reading of 86., which would be a decline from last month’s final reading of 87.4. If it shows a larger decline in consumer confidence, bond prices will likely rise. This should lead to mortgage rates moving slightly lower tomorrow.

If I were considering financing/r efinancing 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… 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.

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