AM Market Update

Wednesday’s bond market has opened in negative territory following stronger than expected economic data and early stock strength. The same economic data is helping to boost stocks this morning, pushing the Dow higher by 113 points while the Nasdaq has gained 19 points. The bond market is currently down 20/32, which will likely push this morning’s mortgage rates higher by approximately .250 - .375 of a discount point over yesterday’s morning pricing.

We have this afternoon’s adjournment of another FOMC meeting that will likely lead to plenty of volatility in the financial and mortgage markets later today. This is not a meeting that will be followed by a press conference with Chairman Bernanke and is expected to yield no change to key interest rates. Although, there is a lot of speculation that the post meeting statement may clarify the Fed’s position or estimation of when they will begin to slow their current $85 billion monthly bond buying program (QE3). This topic has caused a firestorm in the markets multiple times over the past two months, and not always logically. Therefore, it is difficult to make a prediction of what to expect. Theoretically, we would like to hear something that would hint the Fed will not start tapering their purchases in September as many analysts currently believe.

One would think that since the current consensus has September when the Fed will start, hearing it again would not have a negative impact on the bond market. Unfortunately, logic and history does not seem to be a good indicator on how the markets will react to such news recently. That leaves us little to base a prediction on, other than to hold our breath and hope sanity quickly returns to the markets. The meeting will adjourn at 2:00 PM ET, so the fun should begin mid-afternoon. Look for an update to this report shortly after the markets have an opportunity to react to what is said. There is important economic data set for release tomorrow (ISM manufacturing index), but that will be covered in today’s afternoon revision.

 

I strongly suggest locking and in the event rates do go down you can take advantage of our Free rate float down option.