By James Brooks

The bond market is down 6/32 (2.96%), which should push Raleigh Area mortgage rates to increase by approximately .125 of a discount point.

Today has nothing of importance scheduled that is likely to alter mortgage pricing. The major stock indexes being in negative ground is usually positive for bonds and mortgage rates. However, they don’t seem to be relevant this morning as the benchmark 10-year Treasury yield possibly looks to test 3.00% again in the near future. Because mortgage rates tend to track bond yields, this is a cautionary sign for mortgage shoppers who have not locked an interest rate yet.

Tomorrow brings us the release of April's Producer Price Index (PPI) at 8:30 AM ET. This index helps us track inflationary pressures at the producer level of the economy. If it reveals weaker than expected readings, indicating inflation is not of much concern in the manufacturing sector, we should see the bond market improve. The overall index is expected to rise 0.2%, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.2%. A decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds. As inflation rises, longer-term securities become less appealing to investors since inflation erodes the value of their future fixed interest payments. That is one of the reasons why the bond market tends to thrive in weaker economic conditions with low levels of inflation.

Also tomorrow is the first of this week’s two Treasury auctions that have the potential to affect mortgage rates. The Treasury will sell 10-year Notes tomorrow and 30-year Bonds Thursday. Results of the auctions will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sales, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing during afternoon hours.

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.