Thursday's bond market has opened in positive territory following weaker than expected economic news. None of this morning's data was considered to be highly important, so the reaction has been muted. The stock markets are nearly unchanged with the Dow up 2 points and the Nasdaq up 5 points. The bond market is currently up 7/32, which should push this morning's mortgage rates slightly lower.

The final revision to the 2nd Quarter Gross Domestic Product (GDP) showed that the economy grew at a 3.8% annual pace during the April through June quarter. This was slightly lower than the 3.9% that was expected, but since this data is now aged and the preliminary reading of the 3rd Quarter GDP will be released next month, its results had little impact on bond trading or mortgage rates.

The second release of the day was August's New Home Sales that showed an 8.3% decline in sales. This was a much larger drop than was expected, a 7-year low and indicates that the housing sector is still not at the bottom. This is generally good news for bonds but as with the GDP report, it was not important enough to heavily influence trading or rates.

The Labor Department said that 298,000 new claims for benefits were files last week. This was a sizable difference from the 320,000 that was expected and can be considered negative news for bonds. But since it tracks only a week's worth of claims, it has had a minimal affect on rates.

There are two reports scheduled for release tomorrow morning. August's Personal Income and Outlays and the revised reading to the University of Michigan's Consumer Sentiment Index for September. The first will be released early morning and gives us an indication of consumer ability to spend and current spending habits. This is important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. It is expected to show a 0.4% rise in income and a 0.4% increase in spending.

The Michigan index measures consumer confidence and is believed to indicate future consumer spending strength. The preliminary release earlier this month revealed an 83.8 reading. Analysts are expecting to see a small upward revision, bringing the index around the 84.0 level. A lower reading should help improve mortgage rates tomorrow morning, depending on the results of the income and spending data.

If I were considering financing/refinancing a home, I would.... Lock 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

 Also, visit me at www.AtwoodLoans.com