What the Markets Are Doing Today:
The bond market and mortgage backed securities opened in positive territory while the stock markets opened in negative territory this morning. However, prices of bonds and mortgage backed securities reversed course and are continuing their downward spiral (higher yields and higher mortgage rates) that started last Thursday.
- The Dow opened down 21 points from yesterday's close
- NASDAQ opened down 8 points from yesterday's close
- The 10 Year Treasury Bond opened up 6/32 from yesterday's close
- FNMA 30 Year 4.0% coupon opened up 3/32 from yesterday's close
The price of the FNMA 30-Year 4.0 coupon closed down 13/32 (white line) from its opening yesterday, and is currently down 13/32 (blue line). 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 0.5 - 0.75 worse in discount points from yesterday's opening.
Economic Reports Being Released Today:
- Existing Home Sales -Released by the National Association of Realtors, the report tracks the resale of existing homes in the U.S. Existing home sales was up 2.9% in April to an annual rate of 4.680 million, and is as forecasted. Distressed properties (foreclosures and short sales) accounted for 45% of all existing home sales. The year-to-year rate is still down by 3.5%.
Prices of existing home sales held fairly steady, and is up 0.2% to a median $170,200. The year-to-year prices of existing homes are down 15.4%, however. Meanwhile, the supply of homes on the market rose to 10.2 months; it was at 9.8 months in March and 9.7 months in February.
It appears that the housing market is bottoming out, which would indicate that the worst may be over. However, this news is not considered to be of great importance to the bond markets.
Important News of the Day:
The Treasury Dept. will be holding a 5-year Treasury Note auction today. It may have a positive influence on bond trading and possibly mortgage rates if they are met with an exceptional demand.
There will be six important economic reports or news released this week. Two of the six reports - the CCI and the Durable Goods Orders - are highly important to the bond market and mortgage pricing. The remaining reports are considered to be of moderate importance to the markets. 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:
High Volatility. Overall, it will be a busy week for bonds and mortgage rates. There is a pretty good possibility of seeing mortgage rates change several times this week, so please proceed cautiously 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. In addition, there are sign that the global recession is easing, and there is a growing concern over the potential for inflation due to the massive government borrowing and spending.
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...
- Lock if my closing was taking place within 7 days
- Lock 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