Mortgage Blog

Recommendation:  LOCK

Tuesday's bond market has opened in positive territory despite the release of much stronger than expected housing news. The stock markets are showing gains with the Dow up 18 points and the Nasdaq up 8 points. The bond market is currently up 7/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.

February's Housing Starts was released early this morning, showing a surprising jump of 9.0% in new housing starts. This data hints that the housing sector was much stronger than expected last month, which is bad news for bonds. However, another portion of the report showed that new permits for single-family homes fell to a nine-year low. This indicates that next month's starts may be quite weak, which would be good news for bonds.

The FOMC meeting began today and will adjourn tomorrow afternoon. It is expected keep key short-term interest rates unchanged. However, what will likely cause volatility in the markets is the post-meeting statement. Traders are hoping to pick up an indication of future Fed moves, particularly if the Fed expects to cut rates anytime soon. The meeting is the second of four meetings this year that last two days and will adjourn at 2:15 PM ET tomorrow. Therefore, look for afternoon changes in rates Wednesday.

The next economic data comes Thursday when the Conference Board will post its Leading Economic Indicators (LEI) for February. This index attempts to measure economic activity over the next three to six months. Current forecasts are calling for a 0.3% decline, indicating that economic activity will likely slow in the coming weeks. This would be good news for the bond market and mortgage rates.

randy.reed@mpspecialists.com