How I See The Market

Thursday's bond market has opened in positive territory with no important economic or international financial news coming out this morning. An uneventful opening for stocks has also helped keep bonds positive. The Dow is currently up 7 points and the Nasdaq has gained 5 points. The bond market is currently up 7/32, which should improve this morning's mortgage rates by approximately .125 - .250 of a discount point.

In the meantime, Europe continues to concern the market.  Especially if there are any true rumors about hedge funds attempting to get involved in the market.  For years managers having been buying Euros to offset the buying of dollars to maintain an even keel.  Now with the dollar strengthening, fund managers may decide to start dumping Euros.  If that happens it could be challenging for the ECB and the IMF to maintain equilibrium at today's trading prices.  Of course any intervention by the U.S. in part or in whole would strain our own recovery.

The only semi-relevant economic news posted this morning was weekly unemployment figures from the Labor Department. They announced that 444,000 new claims for unemployment benefits were filed last week. This matched revised forecasts and had little impact on this morning's bond trading or mortgage pricing.

There is a 30-year Bond auction being held today with results posting at 1:00 PM ET. Yesterday's 10-year Note sale gave us mixed impressions about the level of interest in the sale. Some measurements were better than the average of the past couple auctions, while other readings indicated a weaker demand. Today's sale is a little less important for mortgage rates than yesterday's auction was, but an overly strong or weak interest from international buyers could influence the broader bond market and affect mortgage rates this afternoon. A strong demand would be good for bonds and mortgage rates as it indicates there still is a demand for longer-term U.S. debt.

There are three pieces of economic data being posted tomorrow morning that are relevant to mortgage rates. The first is the most important of the week and one of the more important ones we see each month. April's Retail Sales is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.2% increase in sales from March to April. A weaker tha n expected level of sales should push bond prices higher and mortgage rates lower Friday morning. However, a larger increase could fuel fears of economic growth that would lead to bond selling and higher mortgage rates.

The second report of the day is April's Industrial Production. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.8% increase in production, indicating that manufacturing activity is growing. A smaller than expected increase in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought.

The last report of the week is May's preliminary reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer willingness to spend, which relates to the importance of consumer spending. This report usually has a moderate impact on the financial markets th ough. It is expected to show a reading of 73.5, which would be a little higher than last month's final reading. If it shows a decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower, assuming the Retail Sales data does not give us a significant surprise.

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.