Market Update for February 27th

Wednesday's bond market opened in positive territory following weaker than expected economic news. The stock markets are currently showing gains with the Dow up 45points and the Nasdaq up 12 points. The bond market is currently up 5/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.

Both of today's economic reports showed weaker than expected readings. January's Durable Goods Orders fell 5.3% when it was expected to fall 4.0%. Today's release also revealed a downward revision to December's orders of 0.8%. This means that new orders for big-ticket items were weaker than expected in December and January. This is good news for bonds because it points towards slowing economic conditions that ease inflation concerns.

The second report of the day was one of the least important of the week. January's New Home Sales report showed a 2.8% drop in sales of newly constructed homes. This was a larger decline than the 0.8% that was expected. However, because this data is not considered to be of high importance to the bond market, it has not had much of an impact on today's mortgage rates.

In this morning's Congressional testimony by Fed Chairman Bernanke, he renewed concerns about a slowing economy but also warned that inflation is still a significant threat. He also said that the employment and housing sectors could see further weakness. The inflation concern is a problem for bonds- generally speaking. But the other comments about employment, housing and overall economic activity were actually favorable to bonds and mortgage rates. Therefore, I would not be surprised to see further improvements in mortgage rates later today and tomorrow. Accordingly, I have shifted to a float recommendation for all periods.

Mr. Bernanke will be speaking to the Senate Banking Committee tomorrow morning, but is not expected to say anything different than today. Any sign ificant reaction in the markets tomorrow will likely come from an answer given to a specific question to him.

The first of two revisions to the 4th Quarter GDP reading is also scheduled for tomrorow morning. Analysts' forecasts currently call for a 0.8% reading, indicating that the economy was a little stronger in the last quarter of the year than initially thought. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market.

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 guaran teed to be in the best interest of all/any other borrowers.