Professional Home Staging and Photography Blog: April 2009

The Daily Mortgage Interest Rate Lock Advisory - April 14, 2009

What the Markets Are Doing Today:

Prices of bonds opened up while the prices of mortgage backed securities opened down (yields up) again this morning while stocks opened in negative territory again this morning on worse than expected economic news.  

  • The Dow opened down 99 points from yesterday's close
  • NASDAQ opened down 19 points from yesterday's close
  • The 10 Year Treasury Bond opened up 2/32 from yesterday's close
  • FNMA 30 Year 4.0% coupon down 3/32 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 8/32 from its opening yesterday, and is now up 1/32 in trading this morning. I expect that mortgage rates will improve by 0.125 to 0.25 in discount points today.

Economic Reports Being Released Today:

  • Producer Price Index (PPI) for March - The overall PPI fell 1.2% last month - and came in much lower than the 0.1% rise that was forecasted. The decline was attributed mostly to lower fuel and food prices. The core PPI, which excludes food and energy prices, eased in at no change from the previous month, and is lower than the 0.2% rise that analysts forecasted. The Producer Price Index (PPI) is a measure of the average price level for a fixed basket of capital and consumer goods received by producers, and provides us with a measurement of inflationary pressures at the producer level of the economy. A decline in prices indicates that inflation is still under control. This is considered good news for the bond market and may lead to lower mortgage rates.

  • Retail Sales Report for March - Retails sales fell 1.1% in March, and is much lower that the 0.3% rise analysts were predicting as soaring job losses are forcing consumers to pull back on spending. This decline follows a 0.3% gain in February and a 1.8% gain in January. The biggest declines were in autos, electronics, and appliances. Released by the Commerce Dept., this report provides us with a measurement of consumer spending at the retail level. Retail sales measure the total receipts at stores that sell durable and nondurable goods, and consumer spending makes up two-thirds of the U.S. economy. A decline in sales is considered good news for the bond markets, and could push bond prices higher and mortgage rates lower.

Important News of the Day:

Ben Bernanke, Chairman of the Federal Reserve, speaking at Morehouse College in Atlanta, said he is optimistic about the long term outlook for the overall economy. He indicated that the sharp declines in U.S. economic activity may be slowing, and that "we will not have a sustainable recovery without a stabilization of our financial system and credit markets. We are making progress on that front as well, and the Federal Reserve is committed to working to restore financial stability as a necessary step toward full economic recovery."

Following news of its return to profitability, Goldman Sacks is planning on raising $5 billion in stock sales to help repay $10 billion it received in Troubled Asset Relief Program (TARP) funds.

The Fed will buy U.S. government securities again today in an effort to cut borrowing costs. The Fed will purchase an undisclosed amount of Treasury inflation-protected securities, or TIPS notes, on Thursday. The Fed hopes to drive down interest rates on consumer and business loans by purchasing government debt in an effort to re-start the economy. The Fed has purchased $36.5 billion worth of Treasuries since the program began on March 25th.

Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

Moderate Volatility. We have a very active week ahead of us, so please proceed cautiously if you're still floating an interest rate. Overall, look for the most movement in rates the middle part of the week. The Retail Sales, PPI and CPI reports are the most important economic reports being released this week. Any of the three reports can cause significant movement in the markets and mortgage rates.

Ben Bernanke, Chairman of the Federal Reserve, is expected to speak at a Kansas City banker's conference on Friday, but I don't think his words will have much of an impact on bonds or mortgage rates.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation.

No one knows how long rates will stay down this time or if they'll go any lower. 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 soon 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
Phone: (508) 443-1332

Lew Corcoran, ASP®, IAHSP, IAHSP-CB
Accredited Home Staging Professional
Professional Real Estate Photographer

Follow me on Google+

Comment balloon 0 commentsLew Corcoran, ASP® • April 14 2009 09:00AM
The Daily Mortgage Interest Rate Lock Advisory - April 14, 2009
share
What the Markets Are Doing Today : Prices of bonds opened up while the prices of mortgage backed securities opened down (yields up) again this morning while stocks opened in negative territory again this morning on worse than expected economic… more
The Daily Mortgage Interest Rate Lock Advisory - April 13, 2009
share
What the Markets Are Doing Today : Prices of bonds were down while the prices of mortgage backed securities were up (yields down) this morning while stocks opened in negative territory again this morning on news that GM may have to file for… more
The Daily Mortgage Interest Rate Lock Advisory - April 10, 2009
share
What the Markets Are Doing Today : The markets are closed today in observance of Good Friday. Economic Reports Being Released Today : There are no economic reports scheduled for release today. … more
The Daily Mortgage Interest Rate Lock Advisory - April 9, 2009
share
What the Markets Are Doing Today : Prices of bonds and mortgage backed securities fell (yields up) while stocks opened in positive territory this morning. The Dow opened up 162 points from yesterday's close NASDAQ opened up… more
The Daily Mortgage Interest Rate Lock Advisory - April 8, 2009
share
What the Markets Are Doing Today : Prices of bonds and mortgage backed securities opened up again this morning. Stocks also opened in positive territory this morning. The Dow opened up 38 points from yesterday's close NASDAQ… more
The Daily Mortgage Interest Rate Lock Advisory - April 7, 2009
share
What the Markets Are Doing Today : Prices of bonds and mortgage backed securities opened up this morning while stocks opened down. The Dow opened down 125 points from yesterday's close NASDAQ opened down 25 points from… more
The Daily Mortgage Interest Rate Lock Advisory - April 6, 2009
share
What the Markets Are Doing Today : Prices of bonds opened up while mortgage backed securities opened flat this morning while stocks opened down after the pending purchase of Sun Microsystems by IBM collapsed, and on concerns of the condition… more