What the Markets Are Doing Today:
The bond market and mortgage backed securities opened in positive territory this morning. Meanwhile, the stock markets opened in negative territory this morning following a worse then expected retail sales report.
- The Dow opened down 134 points from yesterday's close
- NASDAQ opened down 20 points from yesterday's close
- The 10 Year Treasury Bond opened up 11/32 from yesterday's close
- FNMA 30 Year 4.0% coupon opened up 4/32 from yesterday's close
The price of the FNMA 30-Year 4.0 coupon closed up 1/32 from its opening yesterday, and is currently up 6/32. Remember, on MBSs, as the price goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will be the same today as they were yesterday.
Economic Reports Being Released Today:
- Retail Sales Report for April - Retail sales of durable and non-durable goods fell 0.4% in April, and is much lower than anticipated. Analysts predicted the report would reveal a 0.1% increase. Excluding auto sales, sales fell 0.5% in April. Analysts were expecting a 0.3% increase. This is an extremely important report for the financial markets as it measures consumer spending. Because consumer spending makes up two-thirds of the U.S. economy, this data can have a pretty significant impact on the markets. A weaker than expected level of sales should push bond prices higher and mortgage rates lower.
Important News of the Day:
Speaking before the Independent Community Bankers of America, Tim Geithner, Secretary of the Treasury, said that the financial system is beginning to heal and the overall lending conditions have started to improve. But, he added, the recovery will take some time.
Geithner also said the mortgage interest rates have dropped to "an historic low" and is helping the broader economy begin to recover.
This week will be very busy next week with many economic reports scheduled for release. Monday and Tuesday will be fairly quiet, but there will be a couple of key inflation readings, an important measurement of consumer spending and a reading on industrial output in the later part of the week. That means the middle and latter parts of the week will probably be very active with several key reports being posted over three trading days. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch.
What Happening With Mortgage Rates Today:
Moderate Volatility. Overall, it likely will be a pretty active week for mortgage rates. Look for the stock markets to have a major influence on bond trading. I expect to see several noticeable changes in rates this week, and would not be surprised to see multiple intra-day revisions as well. Accordingly, I would strongly recommend maintaining contact with your mortgage professional the next several days if you're still floating an interest rate.
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. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. 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. See today's mortgage rates at www.LewCorcoran.com/RateSheet.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB