What the Markets Are Doing Today:
The bond market opened in negative territory while stocks opened in positive territory this morning following a rally in the stock markets late yesterday afernoon.
- The Dow opened up 36 points from yesterday's close
- NASDAQ opened up 17 points from yesterday's close
- The 10 Year Treasury Bond opened down 5/32 from yesterday's close
- FNMA 30 Year 4.0% coupon down 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 8/32 from its opening yesterday, but is down 2/32 in trading this morning. I expect that today's mortgage rates will remain the same as they were at yesterday's close.
Economic Reports Being Released Today:
- New Housing Starts Report for March - New Housing Starts for March came in much less then expected. New permits, which are pulled prior to construction starting, also fell much more than thought. This indicating that the new home part of the housing sector still remains weak. While this is good news for bonds, its impact on today's trading and mortgage rates has been minimal because this data is not considered to be one of the more important reports we see each month.
- Jobless Claims - 610,000 new claims for unemployment were filed last week, and is much lower than the 658,000 analysts predicted. However, the level of new claims filed has been moving slowly upwards for the past 20 weeks. This indicates that it's taking more time for the jobless to find work. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
- Fed's MBS Purchase Program - The results of this week's purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. To date, the Feds have purchased over $334 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.
Important News of the Day:
The Beige Book report that was released yesterday afternoon didn't reveal any surprises. The report showed that many districts reported stabilizing in some economic indicators. This could be translated to mean that economic activity may begin to strengthen in the near future. However, it is too soon to make that prediction. The report did indicate a continuing a weak labor sector, and that will make an economic recovery more difficult in the near term.
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