What the Mortgage Backed Securities Market is Doing Today:
The FNMA 5.0 Coupon opened down 5/32 from yesterday's close to 101.39, but reversed course on the Consumer's Price Index report which came in slightly less than expected.
The price of the FNMA 30-Year 5.0 coupon closed up 11/32 (as shown by the white line) from its opening yesterday to 101.53, and is currently up 10/32 (as shown by the blue line) to 101.84. Remember, mortgage backed securities (MBSs), as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will be 0.125 - 0.25 in discount points less expensive today as compared to yesterday.
Economic Reports Being Released Today:
- Consumer Price Index (CPI) for May - The report revealed a 0.1% rise in the overall index, slightly less than the 0.3% rise analysts were expecting, and revealed a 0.1% increase in the core data as expected. The core data excludes the more volatile food and energy items. On a year-to-year basis, the CPI is down -1.3%, which is the largest decline in 59 years.
This report is similar to the Producer Price Index (PPI), but measures inflationary pressures at the consumer level of the economy. As with the PPI, a larger increase would raise concerns about rising inflation as it would indicate that the economy is pulling out of the recession. Rising inflation - even fears of possible inflation - causes investors to sell bonds which in turn drives bond prices lower and mortgage rates higher. Because the report came in slightly less than expected, that will have a positive impact on bonds and interest rates (bond prices rise, yields and mortgage rates fall).
Important News of the Day:
There are no government auctions of T-bills, notes and bonds this week. The Treasury will have more auctions for the 2 year, 5 year & 7 year notes on June 23 - 25. On economic news, there are more indications that this recession is not yet over and still months away from any recovery. This will help keep mortgage rates down this week.
The president today will announce plans to overhaul regulation and supervision of the financial sector. Click here to read more about it.
A number of economic reports are due out this week that can influence bond trading and mortgage pricing. 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:
Moderate Volatility. Overall, the busiest days of the week for bonds and mortgage rates are now behind us. However, traders will now begin focusing on the government's auctions of T-bills, notes and bonds next week. There is a pretty good possibility of seeing mortgage rates continue to change this week, so please proceed cautiously if still floating an interest rate.
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 more sense in the short term right now as the markets recover from the dramatic sell off the last couple of weeks, but the ever increasing massive government debt and fears of inflationary pressures could soon drive rates up again. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in. Otherwise keep an eye on the markets and maintain contact with your mortgage professional. The markets can change at any moment.
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