TUESDAY AFTERNOON UPDATE:
Today's FOMC meeting adjourned with an announcement of a three-quarter of a percent cut to key short-term interest rates. This led to a significant stock rally with the Dow up 420 points and the Nasdaq up 91 points. The bond market is currently down 42/32, which will likely lead to upward revisions in mortgage rates of approximately .250 of a discount point.
The stock rally hurt bonds by investors shifting funds from bonds into stocks. Also contributing to this afternoon's selling was the post-meeting statement that indicated the Fed was concerned about inflationary pressures within the economy. Investors took the opportunity to sell bond holdings and buy stocks.
The Labor Department gave us bad news this morning with the release of February's Producer Price Index (PPI). It showed that the overall reading rose 0.3% as expected, however, the more important core data reading that excludes more volatile food and energy prices rose 0.5%. This was well above forecasts of a 0.2% rise and indicates that inflationary pressures are rising at the producer level of the economy. This is bad news for bonds because inflation erodes the value of a bond's future fixed interest payments.
February's Housing Starts was today's second release. It is not considered to be of high importance, but did show stronger than excepted starts of new homes. That could mean that the housing sector may be stabilizing, at least in terms of new construction. This is also considered to be negative news for bonds, but this data is not relied on nearly as much as today's PPI is.
There is no relevant economic news scheduled for release tomorrow. The Conference Board will post its Leading Economic Indicators (LEI) for February late Thursday morning. That index attempts to measure economic activity over the next three to six months. Current forecasts are calling for a 0.3% decline, indicat ing that economic activity will likely slow in the coming weeks. This would be good news for the bond market and mortgage rates.
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... 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.
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