What the Markets Are Doing Today:
Bonds and mortgage backed securities opened in positive territory while the stock markets opened in negative territory this morning.
- The Dow opened down 39 points from yesterday's close
- NASDAQ opened down 8 points from yesterday's close
- The 10 Year Treasury Bond opened up 4/32 from yesterday's close
- FNMA 30 Year 4.0% coupon opened up 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 10/32 from its opening yesterday, and was up as much as 5/32 in trading this morning. I expected that today's mortgage rates will improve by 0.125% - 0.25% in discount points this morning. However, Secretary of the Treasure Timothy Geithner testified before Congress this morning. Upon his testimony, bonds, mortgage backed securities and stocks all reversed course. Bonds are now down and stocks are now up.
Economic Reports Being Released Today:
- There are no economic reports scheduled for release today.
Important News of the Day:
Secretary of the Treasure Timothy Geithner testified before Congress this morning. He stated that most banks now have more capital than they need. He added that the increased liquidity that was pumped into the toxic debt market is helping to determine values for illiquid securities. He also stated that the Troubled Asset Recovery Program (TARP) still has $109 billion available, and that about $25 billion should be repaid this year.
This week is fairly light in terms of economic releases. The Durable Goods Order report, which is being posted on Friday, is the only report of high importance being released this week. The LEI report released yesterday was of moderate importance. 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:
Light Volatility. Overall, it should be a fairly quiet week for mortgage rates. Look for Friday to be the most important day of the week with the Durable Goods Order report being posted. The rest of the week will likely be heavily influenced by the stock markets. If the stock markets rally this week, bonds and MBSs will most likely suffer and mortgage rates will move higher. On the other hand, if stocks fall during the week, we could see bond prices rise and mortgage rates fall.
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