Market Snapshot

Tuesday's bond market has opened in negative territory as stocks recover a good part of Friday's losses. The stock markets are off to a strong start following yesterday's holiday with the Dow up 96 points and the Nasdaq up 27 points. The bond market is down 6 basis points, which has pushed this morning's mortgage rates higher by approximately .125 of a discount point over Friday's morning rates.

Lock or Float

My bias is toward locking with one eye on the 200 day moving average and another on today's Massachusetts Senatorial election.  The FNMA bond closed Friday just above the 200 day moving average - a significant benchmark. But for that average to become a significant level of support the bond needs to close above that mark again. The bond is currently 4 points above the 200 day moving average but has dipped below it for most of the morning.  If Scott Brown upsets Martha Coakley in today's Special Senatorial election in Massachusetts, it will likely send signals to Wall St that health care reform will be trapped in gridlock, and stocks may react positively - having a negative impact on bonds.  Undoubtedly, the trend for mortgage rates is "up" and it may be wise to take advantage of the dip we've seen in the last week and lock here. 

Market News

This week brings us the release of three pieces of economic data to digest, but only one is considered to be of high importance. The first two reports will be released early tomorrow morning. The Labor Department will post their Producer Price Index (PPI) and the Commerce Department will release December's Housing Starts data, both at 8:30 AM. The PPI is much more important to the markets and mortgage rates because it measures inflationary pressures at the producer level of the economy. It is the sister report to last week's Consumer Price Index (CPI) that didn't give us any major surprises. Analysts are expecting to see no change in the overall reading and a 0.1% increase in the more important core data reading that excludes volatile food and energy prices. Unexpected increases, particularly in the core reading, could mean higher mortgage rates tomorrow.

December's Housing Starts helps us measure housing sector strength and future mortgage credit demand by tracking construction starts of new homes. It is not considered to be one of the more important releases each month, so I don't see it causing much movement in mortgage rates tomorrow. It is expected to show little change from November's starts.

Overall, tomorrow will likely turnout to be the most important day of the week with the PPI scheduled. If it meets expectations or is lower than forecasts, we could see mortgage rates close the week lower than this morning's opening levels. There will be discussion about Congress raising the debt ceiling this week that may bring the amount of outstanding U.S. debt in focus again. Unfortunately, if it becomes a hot topic, the bond market may see pressure as everyone is reminded about the large sum of debt we currently have outstanding. But, I don't think we have too much to be concerned with in this week's economic data and could see the rates move little this week.

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.