What the Markets Are Doing Today:
The bond market opened up slightly while stocks opened down this morning on worse than expected economic news.
- The Dow opened down 39 points from yesterday's close
- NASDAQ opened down 16 points from yesterday's close
- The 10 Year Treasury Bond opened up 3/32 from yesterday's close
- FNMA 30 Year 4.0% coupon up 1/32 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 22/32 from its opening yesterday, and is up 1/32 in trading this morning. I expect that today's mortgage rates will improve by 0.125 to 0.25 in discount points today.
Economic Reports Being Released Today:
- Consumer Price Index (CPI) for March - The Consumer Price Index (CPI) for March revealed a 0.1% decline in the overall reading - which was weaker than expect - and a 0.2% increase in the core data - which is slightly better than expected. This indicates that when excluding the volatile food and energy costs, prices at the consumer level of the economy rose slightly more than thought. This is normally considered negative news for bonds and mortgage rates, but the market is not reacting to the report.
- Industrial Production Report for March - The Industrial Production Report for March revealed a much larger slowdown in production than analysts had forecasted. The report showed a 1.5% drop in industrial output - economists were expecting a 0.9% decline. This means that production at factories, mines and utilities slowed much more than many had predicted. This is considered good news for bonds and mortgage rates because a slowing manufacturing activity indicates a weaker economy.
- Fed Beige Book Report -The Federal Reserve will post its Fed Beige Book report at 2:00 PM ET. This report, which is named simply after the color of its cover, details economic conditions throughout the U.S. by region. Because the Fed relies heavily on it during their FOMC meetings, its results can have an impact on the financial markets and mortgage rates if it reveals any surprises.
Important News of the Day:
Look for more details on this next 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.
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
Lew Corcoran, ASP®, IAHSP, IAHSP-CB