August 12th, 2016 2:41 PM by T. Fanning
Last Updated: 8/12/16Friday's bond market has opened well in positive territory following much weaker than expected results in a couple of important economic reports. The stock markets have not had much of a reaction to the news with the Dow down only 15 points and the Nasdaq down 1 point. The bond market is currently up 20/32 (1.49%), but weakness late Thursday should keep the improvement in this morning's mortgage rates to approximately .125 of a discount point if comparing to yesterday's morning pricing. Yesterday's afternoon bond weakness led to widespread upward revisions to mortgage rates. The cause of the selling was not the 30-year Bond auction that actually went fairly well. The indicators showed a similar interest in the securities as Wednesday's 10-year Notes. I believe yesterday's late selling in bonds was more of a reaction to stocks rallying to record levels than anything other reason. Fortunately, this morning's economic data has helped unwind that move.Th e first of today's three economic reports was July's Retail Sales data at 8:30 AM ET. It showed that retail-level sales were flat last month when analysts were expecting to see a 0.4% rise. Furthermore, a secondary reading that tracks sales excluding more volatile and costly auto transactions that was expected to rise actually declined 0.3%. These readings clearly show that consumers spent much less last month than many had thought. Because consumer spending makes up over two-thirds of the U.S. economy, this is bad news for stocks and very good news for bonds and mortgage shoppers.Also at 8:30 AM this morning was July's Producer Price Index (PPI) that gave us some insight into inflationary pressures at the producer level of the economy. It showed a 0.4% decline in the overall reading and a 0.3% drop in the more important core data that excludes more volatile food and energy prices. Both readings were significantly lower than forecasts of no change and +0.2% respectively , meanin g inflation was much weaker than expected at the manufacturing level. Because bonds tend to thrive in weaker economic and low inflationary environments, this report was also quite favorable for mortgage rates.The third and final report of the day was the University of Michigan's Index of Consumer Sentiment for August, coming in at 90.4. This was close to expectations of 90.6 and a bit stronger than July's 90.0. The increase means that surveyed consumers were a little more confident in their own financial and employment situations than they were last month. That in itself is considered bad news for mortgage rates because rising confidence usually means higher levels of consumer spending. However, this was a minor move that wasn't much of a surprise and followed two important reports. Therefore, it has had almost no impact on today's mortgage pricing. Next week brings us the release of a couple of relevant economic reports in addition to the minutes from the most recent FOMC meeting. None of the week's events are set for Monday, so expect weekend news and possibly this afternoon's trading momentum to start the week's tone for bonds. Look for details on next week's calendar in Sunday evening's weekly preview.If I were considering financing/refinancing a home, I would....Lock if my closing were taking place within 7 days...Lock if my closing were taking place between 8 and 20 days...Lock if my closing were taking place between 21 and 60 days...Float if my closing were taking place over 60 days from now...This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers. http://www.hlmcolorado.com/DailyRateAdvisory
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