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Wednesday's bond market has opened strong following the release of this morning's inflation news and Fed Chairman Bernanke's congressional testimony. The stock markets are showing sizable losses with the Dow down 107 points and the Nasdaq down 30 points. The bond market is currently up 15/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.
The Labor Department gave us this morning's important news, saying that the Consumer Price Index (CPI) for June rose 0.2% with the core data also rising 0.2%. The overall reading was slightly higher than expected, but the core reading met forecasts. The lack of a stronger than expected reading was a relief to bond traders and helped prevent an increase in mortgage rates.
June's Housing Starts was also posted this morning, showing a stronger than expected number of new starts. However, offsetting that news was a downward revision to May's starts. But, this data is not considered to be of high importance and did not affect this morning's bond prices or mortgage rates.
In his testimony this morning, Fed Chairman Bernanke said that the economy is expected to grow gradually this year and that the Fed is on guard against inflation. He indicated that the housing slump will likely go on for a longer period than first thought but that it and other risks could affect economic growth. Bond traders seemed to have taken this as good news while stock investors reacted negatively. He will repeat his testimony before the Senate Banking Committee tomorrow morning. Unless a surprise answer comes up during the Q&A portion, we likely will not see much movement in mortgage rates as a result of tomorrow's testimony.
The only other report of any relevance scheduled for this week is June's Leading Economic Indicators (LEI) at 10:00 AM tomorrow. This Conference Board index attempts to measure economic activity over the next three to six months. While it is not a factual report, it still is considered to be of relative importance to the bond market. It is expected to show a 0.1% decline, meaning that we may see a slight decrease in economic activity over the next few months. A larger decline in the index would be good news for the bond and mortgage markets.
Also worth noting is tomorrow's release of the minutes from the last FOMC meeting. There is a possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show some divisiveness by its members during discussion and voting at the last meeting.
If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float 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.
©Mortgage Commentary 2007
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