2006 June

generally loans are due to need for a large amount upfront for one of lifes big buys like a car, new home loan or education loan. you need to first ask yourself  if the purchase you would like to make is creating good debt or bad debt.

Good debt is considered borrowing for something that will apreciate in the long run and at a good rate. For example real estate and education are always smart ideas as of the last 50 years. Student loans can be considered good debt because it should increase your income and the rates are generally very good as well

Bad debt is debt used to fund something that doesn’t hold its value. Some examples would be car loans, boats, technology or personal loans for vacations. any consumable or temp item like this is a bad way to endebt yourself and not a good loan for investment strategy. If you are about to undertake a new home loan in Charlotte, give me a call toll free and I will give you free honest perspective on the phone or in our local huntersville office. We are your neighbor and an honest professional mortgage consultant you can trust to treat you like a friend.

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This week brings us only two reports that are likely to cause movement in mortgage rates. There are a total of three pieces of data scheduled for release during the week, but only one of them is important to enough to warrant concern or much attention. One is considered to be of moderate importance and the remaining is not likely to greatly affect rates unless it varies significantly from forecasts.

The first piece of data is the least important of the three. May’s Housing Starts report will be posted early Tuesday morning, giving us a measurement of housing sector strength. This data usually doesn’t have a major impact on the bond market or mortgage rates and I see no reason for this month’s results to be any different.

Thursday morning brings us the release of May’s Leading Economic Indicators (LEI). The Conference Board, who is a New York-based business research group, will post this data late morning. It attempts to predict economic activity over the next three to six months. If it shows rapidly rising levels of activity, bond prices will probably drop, pushing mortgage rates higher tomorrow morning. But, a weaker than expected reading could lead to lower mortgage pricing. It is expected to show a decline of 0.4%.

The sole important release is due to be released early Friday morning. The Commerce Department will announce May’s Durable Goods Orders, which gives us an indication of manufacturing sector strength. It is known to be quite volatile from month to month and is expected to show an increase of 0.8% in May’s new orders. A larger than expected increase would likely push stock prices higher and mortgage rates lower. A smaller than expected increase would be an ideal scenario for the bond market and could lead to a decline in mortgage pricing Friday.

Overall, I am expecting a fairly quiet week in the bond and mortgage markets. We may see mortgage rates fluctuate slightly day to day, but I don’t think we will see any significant moves until possibly Friday. The quietest days will likely be tomorrow and Wednesday with no data or major speeches to affect the markets. However, I am still holding the lock recommendation for most periods.

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Tuesday’s bond market opened fairly flat but is showing signs of improving. The stock markets are showing another round of losses with the Dow down over 100 points and the Nasdaq down 23 points. The bond market is currently up 3/32, but we will still likely see a slight increase in this morning’s mortgage rates due to weakness in bonds yesterday.

There is little factual economic data scheduled for release this week, but there is a 10-year Treasury Note auction for the bond market to digest. The Treasury Department will auction 10 year Notes Thursday. It is common to see pressure in the bond market as investors sell holdings to prepare for the sales. This often leads to bonds pricing falling and an up tick in mortgage rates leading up to the auctions.

However, as long as the sales are met with a decent demand, investors often buyback after the sales results have been announced. This usually drives bond prices back to pre-auction levels. But, if the sales are met with a poor demand, the selling continues during afternoon trading and can easily create another upward adjustment to mortgage pricing.

The semi-relevant monthly factual report this week is due to be posted Friday morning. April’s Goods and Services Trade Balance data, which gives us the size of the U.S. trade deficit will be released at 8:30 AM. It isn’t likely to cause much movement in the markets or mortgage rates, but nevertheless forecasts are expecting to see a $65.0 billion deficit.

Overall, I expect to see a fairly quiet week in terms of intra-day movement in bonds and mortgage rates. But, I still feel that the risk versus reward scale is still tilted towards too much risk to continue to float an interest rate. With little factual data to drive bond trading following such a sizable rally in bonds, I expect to see traders sell holdings to capture recent profits. Until we see a base established under 5.00% for the benchmark 10 year Note, I will likely hold the lock recommendations.

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Monday’s bond market has opened down slightly with no relevant economic news for the market to digest. The stock markets are showing losses with the Dow down 55 points and the Nasdaq down 7 points. The bond market is currently down 3/32, but we will still likely see a slight improvement in mortgage rates due to Friday’s strong rally.

There is little fac tual economic data scheduled for release this week, but there is a 10-year Treasury Note auction for the bond market to digest. The Treasury Department will auction 10 year Notes Thursday. It is common to see pressure in the bond market as investors sell holdings to prepare for the sales. This often leads to bonds pricing falling and an up tick in mortgage rates leading up to the auctions.

However, as long as the sales are met with a decent demand, investors often buyback after the sales results have been announced. This usually drives bond prices back to pre-auction levels. But, if the sales are met with a poor demand, the selling continues during afternoon trading and can easily create another upward adjustment to mortgage pricing.

The semi-relevant monthly factual report this week is due to be posted Friday morning. April’s Goods and Services Trade Balance data, which gives us the size of the U.S. trade deficit will be released at 8:30 AM. It isn’t likely to cause much movement in the markets or mortgage rates, but nevertheless forecasts are expecting to see a $65.0 billion deficit.

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