What the Markets Are Doing Today:
The bond and mortgage backed securities (MBS) markets both opened in negative territory this morning. Meanwhile, the stock markets opened in positive territory following China's comments that raised concerns that they will begin selling bonds.
- The Dow opened up 30 points from yesterday's close
- NASDAQ opened down 1 point from yesterday's close
- The 10 Year Treasury Bond opened down 18/32 from yesterday's close
- FNMA 30 Year 4.5% coupon opened down 8/32 from yesterday's close
Remember, on MBSs, as the price goes up, the yield goes down - and mortgage interest rates go down with it. Conversely, as the price goes down, the yield goes up - and so do mortgage interest rates. MBS closed up 6/32 from its opening yesterday, but is down 8/32 this morning. I expect mortgage rates will remain essentially unchanged from yesterday's close.
Economic Reports Being Released Today:
- Goods and Services Trade Balance report for January - The report showed that the U.S. trade deficit narrowed to $36.0 billion in January; the trade deficit is less than forecasted. Imports fell 6.7% and exports fell 5.7%. The balance of trade report also showed that the trade improvement was due solely to fewer oil imports. However, this data does not have a major influence on bonds or mortgage rates.
- University of Michigan's Index of Consumer Sentiment for March - The report showed a reading of 56.6, and is a little higher than the 55.0 that analysts were expecting. This means that consumer confidence was a little stronger than expected. Normally this is considered bad news for mortgage rates, but the report has not impacted trading this morning.
Important News of the Day:
China holds approximately $727 billion - or 6% - of the total outstanding U.S. debt. China has made comments that has caused some traders to believe that they may begin selling their holdings in the near future. A selling campaign most likely would drive bond prices lower and yields (and mortgage rates) higher.
There are several important economic reports that will be released next week - including the Producer Price Index and the Consumer Price Index, and another Federal Open Market Committee (FOMC) meeting on Wednesday. Look for more details on next week's events in Sunday's weekly preview. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch on Monday.
What Happening With Mortgage Rates Today:
High Volatility. Overall, I am expecting to see some movement in the markets, and there's continued downward pressure on MBS prices. The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government needs to sell the notes and bonds to pay for the massive debt obligations. I expect the markets will be volatile today.
If you haven't locked in a rate yet, then you may want to continue floating. While floating continues to make sense right now, the ever increasing massive government debt could drive mortgage rates up. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.
My Interest Rate Lock Advice for Today:
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 within 8 and 30 days
- Float if my closing was taking place between 31 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 any or all other borrowers.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB