job security

Daily Rate Lock Recommendation – 04/28/2008 11:33:00 AM EST

Monday’s bond market has opened flat as investors await this week’s economic news and events. The stock markets are following suit with the Dow down a few points and the Nasdaq up 1 point. The bond market is currently nearly unchanged from Friday’s close, so we should see little change in this morning’s mortgage rates.

This week is packed with relevant pieces of economic news in addition to another FOMC meeting. All seven of the reports are considered to be at least moderately important while several are considered very important to the markets and mortgage rates. This makes it likely that we will see plenty of movement in mortgage pricing over the next several days.

The first report comes late tomorrow morning when the Consumer Confidence Index (CCI) for April will be released. This Conference Board index is a key indicator of future spending by consumers. The group surveys 5000 consumers from across the country about their personal financial si tuations. If sentiment is strong or rising, it is believed that consumers are more apt to continue to spend. However, if they are concerned about issues such as job security and investments, they will probably delay making large purchases. The latter is better for the bond market and mortgage rates because the expected slowdown in spending would ease inflation concerns. But, a sizable increase could hurt the bond market, pushing mortgage rates higher Tuesday. It is expected to show a reading of 61.0, which would be a decline from March’s 64.5 reading.

Wednesday brings us the release of two important reports along with the FOMC meeting results. The first is the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best indicator of economic growth or contraction. I expect t his report to cause major movement in the financial markets Wednesday and therefore the mortgage market also. Analysts are expecting to see output at an annual rate of 0.4%. A smaller increase would be ideal for mortgage rates a sit would fuel recession concerns. But, a larger increase would almost certainly cause inflation concerns in the bond market that would push mortgage rates higher Wednesday morning.

The next report of the day is the 1st Quarter Employment Cost Index (ECI), which tracks employer costs for wages and benefits. This gives us a measurement of wage-inflation. If it shows a large increase, we may see inflation concerns cause the bond market to fall and mortgage rates to rise. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.8%.

This week’s FOMC meeting will begin tomorrow but will not adjourn until Wednesday afternoon. It will likely adjourn with an announcement of another rate cut to key short term interest rates. Just how much of a reduction is open for debate. Look for another round of volatility following the 2:15 PM ET post-meeting statement.

Overall, look for plenty of movement in the financial markets and mortgage rates this week. Wednesday or Friday will likely be the most important day of the week with the GDP and Employment numbers being posted along with the FOMC adjournment, but we may see noticeable changes to rates tomorrow also. If this week’s reports reveal weaker than expected economic conditions, the bond market should rally and mortgage rates should fall significantly for the week.

If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking plac e 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.