Thursday’s bond market has opened in negative territory, giving back some of yesterday’s late rally. The major stock indexes are mixed again with the Dow down 27 points and the Nasdaq up 9 points. The bond market is currently down 8/32 (1.52%), which should leave this morning’s mortgage rates approximately .125 of a discount point lower than yesterday’s pre-FOMC adjournment pricing.
Last week’s unemployment numbers were posted early this morning. They showed that 266,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 252,000. Analysts were expecting to see 260,000 initial filings, meaning the employment sector was weaker than many had thought last week. That makes the data good news for bonds and mortgage rates. Unfortunately, this is only a weekly update so its impact on today’s trading and mortgage pricing has been minimal.
We also have the 7-year Treasury Note sale to watch later today. Results will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading. Tuesday’s 5-year Note sale didn’t go too well, leaving us little to be optimistic about today. If there was a strong demand for the securities, we could see bond prices rise and mortgage rates possibly move slightly lower this afternoon.
There are three relevant economic reports set for release tomorrow, including a key measurement of economic growth. The preliminary reading of the 2nd Quarter Gross Domestic Product (GDP) will be released at 8:30 AM ET. This index is considered to be the benchmark indicator of economic growth or weakness. It is the total of all goods and services that are produced in the U.S. and usually has a great deal of influence on the financial markets. This reading is arguably the single most important report we get regularly. Current forecasts are estimating that the economy grew at a 2.6% annual rate during the second quarter, rebounding from the first quarter's 1.1% annual rate. A stronger rate of growth should hurt bond prices, leading to higher mortgage rates tomorrow. But a much smaller than expected reading will likely fuel a bond market rally and push mortgage pricing lower since it would indicate the economy was not as strong as many had thought.
Also at 8:30 AM will be the 2nd Quarter Employment Cost Index (ECI) that tracks employer costs for wages and benefits. This release will give us a measurement of wage-inflation. If it shows a large increase, we may see wage inflation concerns rise as employers will need to pass those increases into the pricing of their products and services. That would be bad news for bonds and mortgage shoppers. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.6%.
The week’s calendar closes with July's University of Michigan Index of Consumer Sentiment just before 10:00 AM ET that will help us measure consumer optimism about their own financial situations. This data is considered relevant because rising consumer confidence usually translates into higher levels of spending that adds fuel to economic growth and is looked at as bad news for bonds. Tomorrow's release is an update to the preliminary reading we saw two weeks ago, so unless we see a drastic revision to the preliminary estimate of 89.5, I think the markets will probably shrug off this news.
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... 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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