2006 July

Monday’s bond market has opened down slightly, following the direction of the stock markets. The Dow is currently down 29 points while the Nasdaq has fallen 5 points. The bond market is currently down 3/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.

There are four important reports scheduled f or release this week that are likely to affect mortgage pricing. The first important release scheduled for the week is June’s Personal Income and Outlays data tomorrow morning. This report helps us measure consumer ability to spend and current spending habits. If it shows sizable increases, bond selling could lead to higher mortgage rates. Current forecasts are calling for an increase of 0.6% in income and an increase of 0.4% in spending.

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Wednesday’s bond market has opened in negative territory, erasing most of yesterday’s gains. The stock markets are showing losses with the Dow down 45 points and the Nasdaq down 18 points. The bond market is currently down 7/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.

The week’s first piece of economic data came this morning with the release of May’s Goods and Services Trade Balance report. It showed a trade deficit of $63.8 billion, which was higher than April’s deficit but not as high as analysts had expected. However, this morning’s data isn’t considered to be of high importance to the markets and hasn’t had a significant impact on the markets or mortgage rates.

There is no highly important data scheduled for release tomorrow. The Labor Department will post weekly unemployment claims, but unless there is a significant change it will likely not affect mortgage rates.

There are two reports due Friday that are likely to affect rates. The Commerce Department is expected to say that sales at retail establishments rose 0.3% last month. This data is considered to be of high importance because it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so any related data is watched closely. A smaller than expected in crease in sales could help fuel a bond rally and lead to lower mortgage rates.

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Friday’s bond market has opened in positive territory following this morning’s release of June’s employment data. The stock markets have reacted negatively to the news with the Dow down 59 points and the Nasdaq down 11 points. The bond market is currently up 9/32, which will likely improve this morning’s mortgage rates by approximately .250 of a discount point.

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Thursday’s Bond Market opened in positive territory which means mortgage rates will likely be better for Thursday. The positive activity comes as a result of the Fed announcement of an increase in key short-term rates. These increases often spur investors to shift assets to the long-term (bond) markets until the market has had a chance to digest the changes.

Other influencing factors include meeting economic forecasts for unemployment, production and consumer confidence levels. When the economy is performing as expected, the markets are much more stable.

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Monday’s bond market has opened in negative territory despite weaker than expected economic news. The stock markets are showing gains with the Dow up 56 points and the Nasdaq up 7 points. The bond market is currently down 3/32, which will likely keep this morning’s mortgage rates at Friday’s levels.

The first of the week’s three reports showed weaker than expected manufacturer sentiment. The Institute of Supply Management (ISM) posted their manufacturing index for June late this morning, showing a treading of 53.8. This was lower than May’s reading and this month’s consensus of 55.0. That indicates that manufacturers felt business worsened slightly from may, which is actually good news for bonds. Unfortunately, the difference wasn’t enough to fuel buying in bonds.

What it all means?: Typically a decline in stock market prices will cause more activity in the bond markets. This will normally lead lower mortgage rates. Today’s bond market opened in the negative because a holiday upcoming and markets being closed, so the negatives in the bond market coupled with the positive influence on a down stock market net a zero change in mortgage rates for the opening day of the holiday week.

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