What the Mortgage Backed Securities Market is Doing Today:
The FNMA 30-Year 4.5% MBS opened down 10/32 this morning to 100.67 as Alcoa's quarterly earnings report came in higher then expected and as new claims for unemployment last week were much less than expected.
The price of the FNMA 30-Year 4.5% coupon closed up 19/32 yesterday to 100.98 (as shown by the white line). MBS is currently trading down 9/32 at 100.70 (as shown by the blue line). Remember, on mortgage backed securities (MBSs), as the price goes down, the yield goes up - and so do mortgage interest rates. I expect that mortgage rates will be 0.125% - 0.25% worse in price this morning as compared to yesterday's close.
Economic Reports for Today:
- Jobless Claims - There were 565,000 new claims for unemployment last week - much lower than the 610,000 new claims that were expected. There were 614,000 new claims filed the previous week. While this is the lowest job loss since the beginning of the year, continuing claims for unemployment increased again last week to 6.769 million. This indicates that it's still taking more time for the jobless to find work. With the high rate of people unemployed, the threat of wage based inflation remains 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. This data is usually not considered to be of high importance to the bond or the mortgage backed securities markets. However, with so few economic reports scheduled for release this week coupled with last week's worse than expected job losses, prices of MBSs fell (yields and mortgage rates rise) on this morning's news.
Important News of the Day:
There was a strong demand for the 10-Year Treasuries at yesterday's auction which led to higher MBS prices and lower yields and mortgage rates yesterday afternoon. However, this morning's jobs report and Alcoa's quarterly earnings report, which was released late yesterday, has caused some profit-taking in bonds this morning.
The Treasury Dept. will be auctioning $11 billion in 30-year Bonds today. A strong demand for the 30-Year Treasury may not have any impact on the markets, but a weak demand could signal that the bond rally may be ending, and may lead to higher mortgage rates this afternoon.
There are only three monthly economic reports scheduled for release the latter part of this week. While the unemployment report may have some impact, none of the scheduled reports are expected to have a major impact on prices of bonds or mortgage backed securities this week. The markets will be impacted more by the Treasury auctions and corporate earnings reports this week. Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch at www.LewCorcoran.com/MyBlog.
What's Happening With Mortgage Rates Today:
Moderate to High Volatility. Overall, I am expecting mortgage rates to be fairly active for the remainder of this week. While yesterday's sales of the 10-Year Treasury notes were met with a strong demand, Alcoa's earnings reports came in better than expected. In addition, today's jobless report indicates that not as many people are losing their jobs as once were. While the economy is still faltering, the recession may be bottoming out. It may not be a return to boom times anytime soon, but things probably won't be getting much worse, either.
Yes, mortgage rates are coming back down once again. But they could be down for just a week. Or possibly a couple of months. Or maybe the rest of the year. Who knows. But if you're purchasing a home, now's the time to make a real concerted effort to finding your dream home. A lower mortgage rate now will either help you with your budget (lower monthly payments) or help you purchase that home you wanted but was just out of reach last month because of higher rates.
If you're refinancing and you missed the last boat, you're getting one more chance to refinance into a lower rate. If you miss this boat, you'll be left stranded high and dry without food and water for a long, long time. (Remember Tom Hanks in ‘Cast Away?') So, if you kinda-sorta-but-apprehensively like the rate that you're being offered today, then there's nothing wrong with locking it in - even if it is a little bit higher than you want it to be. The ever increasing massive government debt and fears of looming inflationary pressures could soon drive mortgage rates up again - this time for good!
Ask yourself this question: Will it hurt me more to lock in now and watch rates drop another eighth or a quarter point, or will it hurt me more to keep floating and watch rates turn for the worse? If you're willing to take the risk and continue watching rates, then hope your now-floating boat doesn't develop any major unstoppable leaks.
The boat you're being offered a ride on this time isn't as seaworthy as the last one you missed. MBSs opened sharply lower this morning. The seas were pretty choppy this morning, and as bond traders struggled to plug each leak before they got any worse, another one developed. So, for those of you on this last boat ride, we may have some smooth sailing ahead, but expect some rough seas and harrowing moments on this voyage.
If you're still floating, then keep a wary eye on the markets and maintain contact with your mortgage professional, because the markets can change at any moment. In fact, you may want to toss that martini and don your life jackets. And if the markets start to change for the worse, then give very real consideration to locking in a rate before it gets much worse. The Coast Guard's budget has been reduced and some stations have been closed. And if you're not prepared, you just might not get saved this time.
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
- 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