Wednesday, December 9, 2009

Economic Outlook for Dec 9th, 2009

Wednesday’s bond market has opened relatively flat following an uneventful opening in stocks. The stock markets are mixed with the Dow up a couple of points and the Nasdaq down nearly the same. The bond market is practically unchanged from yesterday’s closing level, so I am expecting little change in this morning’s mortgage rates.

There is no relevant economic news being posted today, but we do have the first of this week’s two important Treasury auctions. The 10-year Note sale is being held today while 30-year Bonds will be sold tomorrow. Today’s sale is more important to mortgage rates than tomorrow’s is. If there was a strong demand from investors, we should see bond prices move higher after results are posted at 1:00 PM ET. This could lead to downward revisions to mortgage rates this afternoon. However, if the sale was met with a lackluster interest, there is a pretty decent possibility of seeing higher mortgage pricing later today.

October’s Goods and Services Trade Balance report will be posted early tomorrow morning. This report gives us the size of the U.S. trade deficit, but it is the week’s least important release. It is expected to show a $37.0 billion trade deficit. Unless it varies greatly from forecasts, I don’t expect it to affect mortgage pricing.

The Labor Department will post last week’s unemployment figures. They are expected to announce that 465,000 new claims for benefits were filed last week, up from the previous week. That would be considered favorable news for the bond market and mortgage rates, but the truth is that this data is not considered to be highly important because it tracks only a week’s worth of new claims. It usually takes a wide variance between the announced total of new claims and forecasts for them to have much of an impact on mortgage rates.

We do get some important economic data Friday morning when November’s Retail Sales report is released. This is one of the more important reports released each month since it tracks consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so any related data is watched closely. It is expected to show a 0.7% increase in sales at retail level establishments, meaning consumer spending was stronger in November than in October. Since the market is expecting an increase, it will likely take a larger than expected jump in sales for the bond market to react negatively and mortgage rates to rise. A smaller than expected increase should lead to lower mortgage rates Friday.

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 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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