By James Brooks

The bond market is currently up 10/32 (2.23%), which should improve Raleigh area mortgage rates by approximately .125 - .250 of a discount point.

This morning’s sole piece of relevant economic data was the 2nd quarter Employee Productivity and Costs data at 8:30 AM ET. It showed a 0.9% rise in worker productivity and only a 0.6% increase in the Labor Costs index. Analysts were expecting to see a 0.5% increase in productivity and a 1.5% rise in costs. Both readings are favorable for bonds and mortgage rates because higher levels of productivity are believed to allow the economy to grow without fears of inflation. Also, the smaller than expected move in costs indicates wages and benefits are not rising rapidly, helping to keep inflation in check.

Later today, we will get the results of the 10-year Treasury Note auction. It will be followed by a 30-year Bond sale tomorrow. If the sales are met with a decent demand from investors, meaning that interest in longer-term securities such as mortgage-related bonds is good, we could see bonds and possibly mortgage pricing improve during afternoon trading. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher. Results will be posted at 1:00 PM ET of each auction day, so any reaction will come during early afternoon hours.

Tomorrow has two pieces of economic data for the markets to digest, both at 8:30 AM ET. One is much more important than the other. The more important release is July's Producer Price Index (PPI) that will give us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting an increase of 0.2% in the overall index and a rise of 0.2% in the core data. Stronger than expected readings may raise inflation concerns in the bond market. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond's future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leading to falling prices, rising yields and higher mortgage rates.

The second release will be last week’s unemployment figures. They are expected to show that 240,000 new claims for unemployment benefits were filed last week, unchanged from the previous week’s initial claims. Since rising claims hints at employment sector weakness, the higher the number the better the news it is for mortgage rates. It is worth noting though, that because this is only a weekly report, it likely will have little impact on tomorrow’s mortgage rates unless it shows a significant variance.

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.