Monday’s bond market has opened in positive territory following another round of stock selling. The stock markets are reacting negatively to concern about the disaster in Japan and its’ impact on the world economy. The Dow is currently down 125 points while the Nasdaq has lost 32 points. This has shifted funds into the bond market, pushing it higher by 20/32. This should lead to an improvement of approximately .250 of a discount point in this morning’s mortgage rates
There is no relevant economic data scheduled for release today or tomorrow. The rest of the week has five reports scheduled along with tomorrow’s FOMC meeting.. A couple of the reports are considered to be highly important, menaing they will likely influence the financial markets and mortgage pricing.
Tomorrow’s Federal Open Market Committee (FOMC) meeting is a single-day meeting that will adjourn at 2:00 PM ET. It is widely believed that the Fed will make no change to key short-term interest rates at this meeting, but the post-meeting statement will be watched closely for any indication of when they will make a move. Generally speaking, the bond market wants to hear that inflation is not an immediate concern and that key rates will be kept at current levels for the near future. If the statement reassures traders that the Fed will not be raising rates anytime soon and that inflation remains subdued, we can expect the bond market to thrive and mortgage rates to move lower late tomorrow. However, if the statement hints of a move in key short-term interest rates sooner than later, or if inflation is becoming a point of concern, afternoon bond selling will likely lead to higher mortgage rates.
The Labor Department will post February’s Producer Price Index (PPI) early Wednesday morning. This important index measures inflationary pressures at the producer level of the economy. There are two portions of the index- the overall reading and the core data. The core data is more important and watched more closely because it excludes more volatile food and energy (including gasoline) prices. If the index shows a large increase, inflation concerns will rise, making long-term investments such as mortgage-related bonds less attractive to investors. This would lead to higher mortgage rates Wednesday morning. Current forecasts are calling for a 0.6% increase in the overall reading and a 0.2% increase in the core data.
Also Wednesday, February’s Housing Starts report will be posted but it will likely not have much of an impact on mortgage rates. It gives us a measurement of housing sector strength and future mortgage credit demand, but is usually considered to be of fairly low importance to the financial markets unless it shows a large variance between forecasts and actual number of new home starts. It is expected to show a decline in new starts from January to February, signaling weakness in the housing sector.
Overall, look for Thursday to be the most important day of the week due to the CPI release, but tomorrow’s FOMC meeting can also heavily influence the markets. Wednesday may also be an active day for rates with the PPI on tap. Friday will probably be the calmest day for mortgage rates, but it appears there is a good possibility of seeing plenty of movement in rates the next several days. Therefore, please proceed cautiously if still floating an interest rate.
If I were considering financing/refinancing a home, I would….
Lock if my closing were taking place within 7 days…
Lock if my closing were taking place between 8 and 20 days…
Lock if my closing were taking place between 21 and 60 days…
Float if my closing were taking place over 60 days from now…
This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.