Wednesday's bond market has opened in negative territory again, following the path of stocks and other markets despite the Fed rate cut news. The stock markets are showing another round of volatility this morning with the Dow down 60 points and the Nasdaq up 10 points but both well off earlier highs. The bond market is currently down 18/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point.

In a surprise move, the Fed announced an emergency rate cut of a half point to the benchmark Fed Funds rate. This was coordinated with several other international central banks in an effort to spur global economic activity. The markets initially took this as very good news, hence the strong opening in stocks. However, it was short-lived as skepticism about it being enough to fix the crisis rose. The bond market is suffering today, but as previously mentioned, I believe there is still more room for stocks to fall befo re bottoming out. This could mean bonds become the preferred investment and lead to lower mortgage rates in the immediate future.

Yesterday's release of the FOMC minutes and words by Fed Chairman Bernanke actually helped fuel the theory that the Fed was getting ready to lower key rates again. But, not many people expected today's move, particularly the involvement of other central banks. Still, it does signal that the Fed is in tune to the current crisis and ready to act at anytime to help slow or end the market meltdowns.

The only data scheduled for release tomorrow is weekly unemployment figures from the Labor Department. They are expected to show that 475,000 new claims were filed last week, down by 24,000 from the previous week. Unless they vary greatly from forecasts, I don't think this data will affect mortgage rates much.

The only factual economic data of the week will be posted Friday morning. August's Goods and Services Trade Balance will be released that day, but is not likely to cause much of a change in mortgage pricing. It will give us the size of the U.S. trade deficit, but usually does not lead to significant movement in bond prices or mortgage rates.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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 place 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.

©Mortgage Commentary 2008

Monday's bond market has opened fairly flat with the stock markets mixed and despite stronger than expected economic news. The stock markets are in another volatile session after the international markets that had another significant sell-off. The Dow is moving in a range of 250 points between its high and low of the morning, but currently stands up 30 points. The Nasdaq is also fluctuating between positive and negative ground and is currently down 6 points. The bond market is up 2/32, but we will likely see an increase in this morning's mortgage rates of approximately .125 - .250 of a discount point due to movements late Friday.

Today's only economic data is the week's least important. September's New Home Sales report was posted late this morning, showing an increase in sales of 2.7% when it was expected to reveal another decline. However, offsetting that increase was a downward revision to August's sales figures. Still, this data is not considered to be of high importance and has not influenced bond trading or mortgage rates today.

Tomorrow morning brings us the release of the Consumer Confidence Index (CCI) for the month of October. This Conference Board index will be posted at 10:00 AM and gives us a measurement of consumer willingness to spend. It is expected to show a sizable decline in confidence from last month's 59.8 reading, indicating that consumers are less likely to make large purchases in the near future. As long as the reading doesn't exceed the forecasted 52.0, we will likely see the bond market react favorably to this report. This data is watched closely because consumer spending makes up two-thirds of the U.S. economy.

The week's FOMC meeting is a two-day meeting that begins tomorrow and adjourns Wednesday afternoon. Assuming the Fed stands pat and leaves rates unchanged, traders will be looking at the post-meeting statement for any indication of the Fed's next move. Since there is a fair amount of uncertainty and a lack of a strong consensus of what the Fed will do here, the move itself, if it happens, will likely cause plenty of volatility in addition to the post-meeting statement. The meeting will adjourn at 2:00 PM Wednesday, so look for quite a bit of volatility during afternoon hours.

Overall, it is difficult to peg a single day of the week as being the most important but I am expecting to see plenty of movement in rates this week. The data being posted tomorrow, Wednesday and Thursday is all very important to the markets. The FOMC meeting is the single most important event of the week, but we may see noticeable movement in mortgage rates several days this week. Accordingly, please maintain contact with your mortgage professional.

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

©Mortgage Commentary 2008

Friday's bond market opened in positive territory following early stock weakness. The stock markets are continuing their downward spiral with the Dow down 300 points and the Nasdaq down 40 points. The bond market is currently up 20/32, but we will still see an increase in this morning's mortgage rates of approximately .250 - .375 of a discount point due to weakness late yesterday.

The only economic news released today was September's Existing Home Sales data from the National Association of Realtors. They reported an increase of over 5% in home resales last month when the report was expected to show an increase of approximately 1%. This means that sales activity was stronger than expected last month. That can be considered a negative for bonds and mortgage rates, but the market seems to be giving that data little weight.

The recent rapid improvement in bonds has me concerned that we may see profit taking by traders that could push mortgage rates higher. It appears that there is no consensus in the markets regarding whether or not this is the bottom for the stock markets. It seems there is still room for the major indexes to fall further, but this may not necessarily mean that rates will improve as a result, indicating that the risk versus reward factor of continuing to float an interest rate is leaning heavily to the risk side in my opinion. Accordingly, please maintain constant contact with your mortgage professional if you have not locked an interest rate yet.

Next week is packed with economic releases along with the next FOMC meeting. The first data comes Monday when we will get New Homes Sales for September. This is the sister report to today's Existing Home Sales release and is also not considered to be of much importance to the markets. It is next week's least important report.

The rest of the week brings us important reports every day. There is another FOMC meeting that adjourns W ednesday afternoon that will likely lead to plenty of volatility in the markets. Look for details on next week's data and events in Sunday's weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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 place 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.

©Mortgage Commentary 2008

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Wednesday's bond market opened well in positive territory but has since given back those gains. The stock markets are showing more losses with the Dow down 328 points and the Nasdaq down 55 points. The bond market is currently nearly unchanged from yesterday's close, but we will still see an increase of approximately .375 of a discount point in this morning's mortgage rates due to significant selling in bonds late yesterday.

September's Retail Sales report was released early this morning. It showed a drop 1.2% drop in sales that was much weaker than expected. Analysts had called for a 0.7% decline, meaning that consumers were spending much less than many had thought. This is good news because consumer spending makes up two thirds of the U.S. economy, which translates into weaker economic activity and lower inflationary pressures. Those two factors make long-term securities such as mortgage related bonds more attractive to investors.

Today's se cond report was September's Producer Price Index (PPI). It gave us mixed results with an over reading of down 0.4% that matched forecasts, but a higher than expected core data reading of 0.4%. This means that prices at the producer level of the economy rose more than was expected if food and energy prices are excluded from the equation. This is bad news for bonds because rising prices means inflation is still a threat to the economy.

Also scheduled for release today is the Fed Beige Book during afternoon trading. This data details economic conditions throughout the U.S. by region. It is relied upon heavily by the Federal Reserve during FOMC meetings when determining monetary policy. If it reveals stronger signs of inflation from the last release, we could see mortgage rates revise higher shortly after its 2:00 PM ET release.

Tomorrow morning also brings us two economic releases. The first is September's Consumer Price Index (CPI) that measures inflat ionary pressures at the consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see a rise of 0.1% in the overall index and an increase of 0.2% in the core data reading. A larger than expected increase in the core reading could raise inflation concerns in the bond market and push mortgage rates higher tomorrow. However, a smaller than expected reading should ease inflation concerns and could lead to lower mortgage rates.

September's Industrial Production data is the second release of the day and will be released mid-morning. It gives us an indication of manufacturing strength by tracking orders at U.S. factories, mines and utilities. It is expected to show a 0.8% drop in output from August's level, meaning that manufacturing activity fell sharply. A smaller than expected decline or an increase in output would be negative for bonds and mortgage rates while a larger drop should help push mortgage rates lower, assuming that the CPI shows favorable results.

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 place 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.

©Mortgage Commentary 2008

Tuesday's bond market has opened down sharply following yesterday's enormous gain in stocks. The bond market was closed yesterday in observance of the Columbus Day holiday, but the stock markets were open. The result was a 963 point gain in the Dow that was the biggest percentage daily gain in 75 years. That rally carried over to this morning's early trading but has since lost steam.

The Dow is currently down 40 points after being up approximately 400 points earlier. The Nasdaq, which closed higher by 194 points yesterday and was up 50 points this morning, is now down 30 points. The bond market is currently down 27/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point.

There is no relevant data scheduled for release today. The rest of the week brings us the release of seven economic reports that are of interest to the mortgage market. It also gets heavy in quarterly corporate earnings, whic h could cause significant movement in the stock markets again. The earnings results could affect bond trading as investors move funds into stocks if the reports are good. The other possibility is that the earnings reports would generally disappoint, meaning investors may move funds out of stocks and into bonds as a safe-haven. The latter would be good news for the bond market and mortgage rates. I suspect we will get results that should be favorable to bonds, so I am shifting to a float recommendation.

The first pieces of data come tomorrow morning, which are two of the week's more important releases. The first is September's Retail Sales report. This data is very important to the markets because it measures consumer spending by tracking sales at retail establishments in the U.S. Since consumer spending makes up two-thirds of the U.S. economy, any related data is considered to be highly important. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates should drop. However, stronger than expected sales could fuel a stock rally and push mortgage rates higher. Current forecasts are calling for a 0.7% decline in sales.

September's Producer Price Index (PPI) is the second report of the day. This index measures inflationary pressures at the producer level of the economy and is also considered to be of high importance to the markets. Analysts are expecting to see a decline of 0.4% in the overall index and a 0.2% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. A larger than expected increase could fuel inflation concerns in the bond market and push mortgage rates higher. But, weaker than expected readings should lead to lower rates, especially if the sales report doesn't give us stronger than expected results.

Also scheduled for release tomorrow is the Fed Beige Book duri ng afternoon trading. This data details economic conditions throughout the U.S. by region. It is relied upon heavily by the Federal Reserve during FOMC meetings when determining monetary policy. If it reveals stronger signs of inflation from the last release, we could see mortgage rates revise higher shortly after its 2:00 PM ET release.

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 place 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.

©Mortgage Commentary 2008

Friday's bond market has opened down sharply again despite an extremely volatile morning in stocks. The stock markets initially opened with huge losses then recovered, but are now sliding again. The Dow is currently down 350 points after falling 700 points right after the morning bell. The Nasdaq is currently down 56 points, which is well off earlier lows and highs. The bond market is now down 29/32 despite the stock weakness. This will likely push this morning's mortgage rates higher by another .375 of a discount point.

This sounds like a broken record, but it still is the situation that we are seeing. Last night's major sell-off in the international markets has carried into this morning's trading. The markets still seem to be lost and unable to gain any solid traction and I am surprised that bonds are still taking a hit with the major stock indexes in a free-for-all downward spiral. But, until we see some stabilization, it is nearly impossible to mak e an educated guess of which direction the markets and mortgage rates will move.

August's Goods and Services Trade Balance was released this morning, revealing a $59.1 billion trade deficit. This nearly pegged forecasts, so as expected has had no impact on this morning's trading or mortgage rates.

Next week brings us the release of several important economic reports for the markets to digest. I would like to say this is good news for bonds as investors will have factual data to rely on and to influence trading. But, with the past two week's volatility and little data being posted this week, I am a little scared to think of what could happen to the markets if we get much weaker or stronger than expected results. I would like to think that weak data will be favorable for bonds, but with stocks and bonds moving in the same direction currently, that news may not turn into lower mortgage rates. We will see.

The fun starts in the middle of the week, but the latter days of the week bring us some very important data. There are two key inflation readings, retails sales data and the Fed Beige Book amongst others. Look for more details on next week's events in Sunday's weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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 place 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.

©Mortgage Commentary 2008

Recently I asked Jeff Greige Vice President of Paramount Mortgage to give me the straight scoop on the local Home Mortgage Market.

 

On the Frontline with the Home Mortgage Market

ST. LOUIS, MO – There has been many stories of gloom and doom in the media concerning the U.S. financial climate over the past few weeks. How does this affect the average St. Louis home buyer? Have mortgage funds dried up?

“The mortgage market is not as bad as the media is portraying it,” remarks Jeff Griege, Vice President at Paramount Mortgage, “so, as the phrase goes, don’t believe the hype!” When you apply a common sense perspective to the situation it is “honestly, no different now than it was 6 months ago,” continues Griege.

There is plenty of money to lend to the mortgage market. – The government takeover of Fannie Mae and Freddie Mac is designed to put downward pressure on mortgage rates and to ensure that home loans remain available. With Freddie and Fannie under control, mortgage funds will not dry up.

Treasury Secretary Henry Paulson says the government has three objectives: "market stability, mortgage availability and taxpayer protection." That's another signal that the government wants mortgages to remain available, at good rates, to borrowers with a low risk of default.

The Paramount Mortgage perspective – Since the bail out of Fannie and Freddie rates have dropped on average .5% to .75%, subject to daily market fluctuations. “What has changed over the last six months is that anyone with a credit score under 720 will get a slightly higher rate. On average, this will consist of an additional .125% increase on a conventional loan,” stated Griege. Additionally, “FHA‘s rate adjustment cut off is a credit score of 620.”

The conventional adjustment is not dramatic considering rates are still at 25-year lows. Anyone with a credit score under 680 will find it better to finance with a FHA-backed loan instead of a conventional loan especially if their down payment is less than 20% of the purchase price. The rate adjustment for credit scores under 680 on a conventional loan could consist of an additional .75% added to the rate. FHA’s maximum loan limit for the St. Louis metro area is $281,250.

According to Griege, “the only areas in the mortgage markets that are suffering are the Jumbo loans (loans above $417,000). Fixed rates are in the high 7’s to low 8’s with at least 20% down.” ARMs (Adjustable Rate Mortgage loans) are good options with rates around the Mid 6’s but, a minimum down payment of 10% is required and preferably 20%. Bottom line – people with reasonable credit purchasing a home under $417,000 can still get financing.

Thursday's bond market has opened down sharply despite a lackluster opening in stocks. The stock markets are mixed with the Dow down 16 points and the Nasdaq up 20 points. The bond market is currently down 33/32, which will likely push this morning's mortgage rates higher by approximately .375 - .500 of a discount point.

The markets still seem to be lost and unable to gain and solid traction. I am surprised that bonds are taking as much of a beating today as they are, especially with no solid gains in stocks. However, this could mean some traders feel the bottom is near for the stock markets and that funds are likely to shift back into stocks very soon. Accordingly, we may want to consider locking a rate is still floating and if closing in the immediate future.

There was no monthly or quarterly economic news released today. The only data posted was weekly unemployment figures from the Labor Department. They reported that 478,000 new claims for benefits were filed last week. This was a decline from the previous week's 498,000 claims but was slightly higher than forecasts. But, since this data is not considered to be of high importance since it tracks only a week's worth of claims, it has not been able to help bonds this morning.

August's Goods and Services Trade Balance will be released early tomorrow, but is not likely to cause much of a change in mortgage pricing. It will give us the size of the U.S. trade deficit, but usually does not lead to significant movement in bond prices or mortgage rates. It is expected to show a $59.0 billion trade deficit.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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 place over 60 days from now... This is only my opinion of what I wou ld 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.

©Mortgage Commentary 2008

Tuesday's bond market has opened in negative territory as the volatility in the stock markets continue. After opening in positive territory, the Dow and Nasdaq have fallen into negative ground. The Dow is currently down 60 points while the Nasdaq has lost 20 points. The bond market is currently down 15/32, but I am not expecting to see much of a change in this morning's mortgage rates.

If the major stock indexes continue to flip flop between positive and negative ground, we will likely see bonds and mortgage rates fluctuate also. Until the markets stabilize, it will be difficult to predict movement in mortgage pricing. However, I still believe that there is more room for stocks to fall, which would likely improve bonds and lower mortgage rates. In fact, I would not be surprised to see the 10,000 Dow benchmark be a ceiling for the immediate future. Accordingly, I am cautiously holding the float recommendations for the time being.

The first news of the week comes this afternoon when the Fed will release the minutes to the last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over inflation and the Fed's next move. If the Fed members were concerned about inflationary pressures, we may see the bond market move lower and mortgage rates higher tomorrow afternoon. However, if they indicate that inflation is easing and that a rate increase is not likely in the coming months, we should see the bond market rise and mortgage rates drop during afternoon trading.

The only factual economic data of the week will be posted Friday morning. August's Goods and Services Trade Balance will be released that day, but is not likely to cause much of a change in mortgage pricing. It will give us the size of the U.S. trade deficit, but usually does not lead to significant movement in bond prices or mortgage rates.

If I were consider ing 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 place 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.

©Mortgage Commentary 2008

Monday's bond market has opened up sharply after this morning's stock markets are selling off again. The Dow is currently down 450 points while the Nasdaq has 100 points. The bond market is currently up 29/32, which will likely improve this morning's mortgage rates by approximately .375 of a discount point.

This morning's stock losses has pushed the Dow below the 10,000 mark for the first time since late October 2004. I appears that this trend may continue, at least for the short-term and should benefit bonds as investors seek safe-haven. Accordingly, I am shifting to a float recommendation across the board. This may change back to lock at any time, but as long as stock are moving lower we should see mortgage rates follow suit.

This week brings us only one monthly economic report for the markets to digest and it is not considered to be of high importance. This means that the week will be left mostly up to the stock markets and other influences since there is a lack of factual data for bonds to trade on. In addition to the one report, we will also get the minutes from the last FOMC meeting that can also cause movement in rates if it reveals any surprises.

The first news of the week comes tomorrow afternoon when the Fed will release the minutes to the last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over inflation and the Fed's next move. If the Fed members were concerned about inflationary pressures, we may see the bond market move lower and mortgage rates higher tomorrow afternoon. However, if they indicate that inflation is easing and that a rate increase is not likely in the coming months, we should see the bond market rise and mortgage rates drop during afternoon trading.

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 place 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.

©Mortgage Commentary 2008

Friday's bond market has opened in negative territory despite favorable results from the Employment report that was posted this morning. The stock markets are rallying as optimism about the House approving the bailout plan grows. The result is a 201 point gain in the Dow and the Nasdaq rising 57 points. The bond market is currently down 24/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point.

The Labor Department reported this morning that the U.S. Unemployment Rate remained at 6.1% last month, as it was in August. The good news came in the form of the number of payrolls lost and the average earnings reading. Today's report showed that 159,000 jobs were lost during the month, exceeding the 105,000 loss that was expected. It was also the ninth consecutive monthly loss and the biggest monthly decline since March 2003. The average hourly earnings was forecasted to rise 0.3%, but rose only 0.2%. Both of those readings are favorable to bonds and mortgage rates because they indicate that the employment sector is still weakening and that wages are not rising as quickly as thought.

I would not be surprised to see afternoon revisions to mortgage rates if stock prices continue to rise or give back their current gains. The bond market has been at the mercy of stocks the past two weeks and we may see more volatility this afternoon as the debate about the bailout measure continues. The House could bring the bill to a vote this afternoon, which may heavily influence the markets and mortgage rates. It the vote appears likely to pass, the stock markets will likely rise and bond prices will fall, leading to higher mortgage rates. However, if concern rises that the vote will fail, we could see stock prices fall and bond prices rise enough to improve mortgage pricing this afternoon.

Next week is very light in terms of economic releases scheduled. There is littl e relevant data on the calendar for next week, but we will get the minutes from the last FOMC meeting. Look for more details on next week's event s in Sunday's weekly preview.

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

©Mortgage Commentary 2008

Thursday's bond market has opened in positive territory following weaker than expected economic news and another round of stock losses. The stock markets seem to be worried about the potential approval of the Fed bailout program that the Senate approved last night. The result is the Dow down 220 points and the Nasdaq losing 53 points. The bond market is currently up 24/32, which will likely improve this morning's mortgage rates by .125 - .250 of a discount point.

The Commerce Department gave us August's Factory Orders data late this morning, saying that new orders for durable and non-durable goods fell 4.0%. This was a much larger decline than was expected and indicates that the manufacturing sector is still slowing. That is good news for the bond market and mortgage rates.

Also released this morning were last week's unemployment claim figures. The Labor Department said that new claims rose to 497,000 last week, reaching a seven year high. Thi s is also good news because it raises concerns about what tomorrow's monthly Employment report will show.

The Labor Department will post September's Employment report early tomorrow morning. This report will reveal the U.S. Unemployment rate, number of new payrolls added and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.

Weaker than expected readings should help boost bond prices and lower mortgage rates tomorrow. However, stronger then forecasted readings would not be good news for mortgage pricing. Analysts are expecting to see the unemployment rate 6.1%, a decline in new payrolls of approximately 105,000 and a 0.3% increase in earnings.

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

©Mortgage Commentary 2008

Wednesday's bond market has opened in positive territory as investors show concern about today's Senate vote on the Fed bailout plan. The stock markets are showing losses with the Dow down 113 and the Nasdaq down 22 points following yesterday's record gain in the Dow. The bond market is currently up 33/32, but we will still see an increase in this morning's mortgage rates of approximately .375 of a discount point due to yesterday's sell-off in bonds as stocks rallied.

Also helping boost bonds today was a large drop in the Institute for Supply Management's (ISM) manufacturing index for September. Today's release revealed a reading of 43.5, which was its lowest reading since October 2001. Analysts were expecting to see a reading of 49.5, meaning manufacturer sentiment about business conditions was much lower than thought. This is good news for bonds because a weakening manufacturing sector indicates slowing economic activity and eases inflation concerns.

We need to again keep an eye on the stock markets and Fed bailout vote. The Senate is expected to vote on their plan this evening, after the markets close. Current polls are expecting the measure to pass the Senate vote, but the real question is what the House will do with it once they get it. Since current expectations are showing passage by the Senate, I don't think we will see a massive sell off in stocks again today. It seems that the markets are more concerned about the House approving the bill if the Senate does approve it. As we get closer to the House vote, we will likely see the volatility in stocks rise.

The Commerce Department will post August's Factory Orders data late tomorrow morning. This manufacturing sector report is similar to last week's Durable Goods Orders release, but includes orders for non-durable goods. It can usually impact the financial markets enough to change mortgage rates if it varies from forecasts by a wide margin. Cu rrent forecasts are calling for a decline in new orders of approximately 2.9%. An unexpected rise could drive mortgage rates higher, while a weaker than expected reading should push them lower tomorrow. However, look for the results form tonight's Senate vote to heavily influence trading in the markets tomorrow morning.

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

©Mortgage Commentary 2008