Today's Commentary

Updated on April 23, 2014 10:28:29 AM EDT


Wednesday’s bond market has opened in positive territory due to early stock weakness and weaker than expected economic news. The stock markets are fairly clam but showing relatively minor losses with the Dow down 22 points and the Nasdaq down 24 points. The bond market is currently up 9/32, which should improve this morning’s mortgage rates by approximately .125 of a discount point.

Today’s only relevant economic data was March's New Home Sales data at 10:00 AM ET. The Commerce Department announced that sales of newly constructed homes fell 14.5% last month, touching their lowest level in eight months. This was a much weaker level of sales than analysts were expecting, indicating a softer than thought new home portion of the housing sector. That makes the data good news for the bond market and mortgage rates.

Today also brings us the first of this week’s two Treasury auctions that have the potential to influence bond trading enough to affect mortgage rates. 5-year Treasury Notes will be sold today while 7-year Notes go tomorrow. Neither of these sales will directly impact mortgage pricing, but they can affect general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make government securities more attractive to investors and bring more funds into bonds. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET today and tomorrow, so look for any reaction to come during early afternoon hours.

Besides the second Treasury auction, we also have two pieces of economic data to watch tomorrow. The more important of the two is March's Durable Goods Orders at 8:30 AM ET. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products that are expected to last three or more years, such as airplanes, appliances and electronics. Current forecasts are calling for an increase in new orders of 2.0%. This would be a sign of manufacturing sector strength, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A large decline would be considered good news for bonds and mortgage pricing, while a large rise would indicate economic strength. A sign of solid manufacturing growth could lead to higher mortgage rates tomorrow.

Also at 8:30 AM tomorrow is the weekly unemployment update. It is expected to show that 312,000 new claims for unemployment benefits were filed last week, up from the previous week’s 304,000. The higher the number of new claims, the better the news it is for mortgage rates because rising claims indicates a weakening employment sector. But because this is only a weekly report, it requires a noticeable variance from forecasts more times than not for it to directly affect mortgage rates.

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... Lock 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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