Today's Commentary

Updated on October 31, 2014 10:42:33 AM EDT

Friday’s bond market has opened in negative territory due to early stock strength. The major stock indexes are in rally mode this morning following news that the Bank of Japan is boosting its current economic stimulus program by a considerable amount. That news has pushed the Dow up 132 points and close to a new record high while the Nasdaq has gained 52 points. The bond market is currently down 7/32 (2.33%), which will likely increase this morning’s mortgage rates by approximately .125 of a discount point.

The first of this morning’s three economic reports showed that employer costs for wages and benefits rose more than expected last quarter. The Employment Cost Index rose 0.7% compared to analysts’ forecasts of a 0.5% increase. That is a sign of wage inflation, making the data negative for bonds and mortgage rates. However, this news is having little impact on today’s early trading because it is not a widely watched report.

Also at 8:30 AM ET this morning was September's Personal Income and Outlays report. It revealed that personal income rose 0.2% last month while spending fell 0.2%. Both readings were weaker than forecasts, showing that consumers had more money to spend than they did in August but less than many had thought. However, they actually spent less in September than in August. Since consumer spending makes up over two-thirds of our economy and bonds tend to thrive in weaker economic conditions, this report was good news for mortgage rates.

The final report of the day was the University of Michigan’s revised Index of Consumer Sentiment for October just before 10:00 AM ET. It came in at 86.9, up a little from the preliminary estimate of 86.4. The increase points towards a slightly stronger level of consumer confidence and a better likelihood of spending money, so we should consider the data slightly negative for the bond market and mortgage rates.

Next week does not have many relevant reports scheduled for release, but most of what is being posted is considered to be extremely important to the financial and mortgage markets. The week starts with the Institute for Supply Management’s (ISM) manufacturing index late Monday morning and closes with the almighty Employment report Friday morning. Look for details on those and the rest of next week’s events in Sunday evening’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.

 ©Mortgage Commentary 2014
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