Rate Lock Advisory For 4/15/2008

Tuesday's bond market has opened in negative territory after this morning's economic news renewed inflation related concerns. The stock markets are also reacting negatively with the Dow down 15 points and the Nasdaq down 5 points. The bond market is currently down 8/32, which with yesterday's late weakness will likely push this morning's mortgage rates higher by approximately .250 - 375 of a discount point.

The Labor Department posted March's Producer Price Index (PPI) this morning, showing a surprising 1.1% jump in the overall reading. This was much higher than the 0.6% increase that was expected. Fortunately, the more important core data reading that excludes more volatile food and energy prices met forecasts with a 0.2% increase. This data gives us an important measurement of inflationary pressures at the producer level of the economy. The core data reading is somewhat good news, but the jump in the overall reading is a concern to traders.

There are four pieces of news scheduled for release tomorrow. The first is the sister report of the PPI with the release of March's Consumer Price Index (CPI). This index is very similar to today's PPI, but tracks prices at the more important consumer level of the economy. This is one of the most important pieces of data we see each month, so stronger than expected readings will undoubtedly lead to higher mortgage rates. Current forecasts are calling for an increase of 0.3% in the overall index and 0.2% in the core data.

March's Housing Starts report is the second report to be posted, but it will most likely be a non-factor in the market. It gives us a measurement of housing sector strength and mortgage credit demand, however, usually doesn't cause much movement in mortgage pricing unless it varies greatly from forecasts. It is this week's least important report.

The third is March's Industrial Production report at 9:15 AM ET. It gives us a measurement o f output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Current forecasts are calling for a decline in production of 0.1%. Since signs of a weakening economy are considered favorable to bonds and therefore mortgage rates, a larger decline would be good news for mortgage pricing. However, the CPI is by far the most important data of the day.

The Federal Reserve will post its Fed Beige Book report at 2:00 PM ET tomorrow. This report, which is named simply after the color of its cover, details economic conditions throughout the U.S. by region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises.

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... Float i f 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.