Happy St. Patrick's Day
What the Markets Are Doing Today:
The bond and mortgage backed securities (MBS) markets both opened up slightly but are almost flat this morning. Stocks also opened up slightly,but have see-sawed between positive and negative territory this morning.
- The Dow opened up 5 points from yesterday's close
- NASDAQ opened up 8 point from yesterday's close
- The 10 Year Treasury Bond opened up 1/32 from yesterday's close
- FNMA 30 Year 4.5% coupon opened up 2/32 from yesterday's close
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 1/32 from its opening yesterday, and is currently down 1/32 this morning. I expect mortgage rates will remain essentially unchanged from yesterday's close.
Economic Reports Being Released Today:
- Producer Price Index (PPI) for February - The PPI rose 0.1% last month, but it came in lower than the 0.4% rise that economists were predicting. It's the 2nd monthly increase, but came in lower than the 0.8% rise in January. The core PPI rate rose 0.2%, which came in slightly higher than predicted, but follows a 0.4% increase in January. While energy prices increased 1.3%, food prices fell 1.6%. Declining food prices was the biggest factor in the lower PPI numbers.
The PPI is a measure of the average price level for a fixed basket of capital and consumer goods at the wholesale level before they are passed along to consumers. Thus, this index measures inflationary pressures at the producer level. There are two parts of the index - the overall reading and the core data. The core data is more important and is watched more closely because it excludes food and energy prices.
Overall, the February PPI report shows that price pressures are easing despite some firming in energy costs. This is considered good for bonds and mortgage backed securities. This will help keep their prices up and yields (and mortgage rates) down.
- Housing Starts for February - Housing starts rebounded in February, rising more than 22% to an annualized rate of 583,000 units; this is much higher than the 455,000 new units analysts were predicting. However, the year-to-year rate is still down more than 47%. Most of the improvement was in multi-family homes. New housing permits rose 3% to 547,000 annualized units, but they are down more than 44% year-to-year.
While new housing starts are encouraging, also remember that builders tend to slow down in the cold winter months, so the upsurge as the weather warmed may not be as strong as indicated. Additionally, this report is usually considered to be of little importance to the financial markets, and will likely have little or no impact on mortgage rates.
Important News of the Day:
The Federal Open Market Committee (FOMC) meets today and tomorrow, with a press release at 2:15 PM ET. The key short term rate is at a range of 0% - .25% and likely will remain there for some time. The Federal Reserve should be more focused (hopefully) on economic recovery, the Treasury Debt purchase program as well as the Term Asset-Backed Securities Loan Facility (TALF) to unfreeze the credit markets.
There are several important economic reports that will be released this week - including the Producer Price Index and the Consumer Price Index, and another Federal Open Market Committee (FOMC) meeting today and tomorrow. 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:
Light Volatility. Overall, I'm not expecting to see too much movement in the markets today or tomorrow morning while the FOMC meets.
There's 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.
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 soon 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...
- 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.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB