What the Markets Are Doing Today:
Both the bond market and Mortgage Backed Securities (MBSs) opened up in price today before retreating. Both are now down in price (yields up) Friday's bond market despite weaker than expected economic news. The stock markets are also reversing course from early morning losses:
- The Dow opened down 140 points from yesterday's close and is currently down 16 points
- NASDAQ opened down 18 points from yesterday's close and is currently up 1 point
- The 10 Year Treasury Bond opened up 15/32 from yesterday's close and is currently down 14/32
- FNMA 30 Year 4.5% coupon opened up 5/32 from yesterday's close and is currently down 3/32
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 down 2/32 from its opening yesterday morning, and is currently down another 3/32 late this morning. I expect mortgage rates again will be a little more expensive today than yesterday by an 0.125% in price.
Economic Reports Being Released Today:
- Revision to the 4th Quarter GDP - The 4th Quarter GDP was revised downward from last month's preliminary estimate. The GDP shrank at 6.2% annual pace, and is the worst quarterly reading since 1982. It is also weaker than the 5.2% decline that analysts were forecasting, and is also much weaker than the negative 3.8% that was posted last month. That indicates that the economy is weaker than many had believed. This is generally considered good news for the bond market and mortgage rates.
A key inflation reading that is contained in the report went from a -0.1% to a +0.5%. This means that despite the drop in activity, economists are still concern about inflation. This reading, along with increased debt supply concerns as a result of the Fed's revised holdings in Citigroup, is having a negative impact on bonds and MBS (prices fall, yields up).
- Revision to the University of Michigan's Index of Consumer Sentiment for February - The index showed a reading of 56.3, which iss little change from this month's previous estimate of 56.2. This news had no impact on the markets.
Important News of the Day:
The Treasury Department has agreed to a third rescue attempt of Citigroup. The Feds could convert up to $25 billion of preferred shares into common stock. The conversion gives the U.S. a 36% share of Citigroup
Economic reports are scheduled for everyday next week except Tuesday. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch on Monday.
What Happening With Mortgage Rates Today:
High Volatility. Overall, I am expecting to see some movement in the markets, and there's additional downward pressure on MBS prices again today (meaning higher rates). Also, the supply of T-bills on the market to pay for the massive debt obligations continues to weigh heavily on the market. I expect the markets will be volatile today.
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 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...
- 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.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB