What the Markets Are Doing Today:
Stocks and bonds opened up (yields down) this morning while mortgage backed securities opened down. After the news yesterday afternoon, there's not much to say this morning other than expect some profit taking in the markets over the next couple of days.
- The Dow opened up 62 points from yesterday's close
- NASDAQ opened up 16 point from yesterday's close
- The 10 Year Treasury Bond opened up 14/32 from yesterday's close
- FNMA 30 Year 4.5% coupon opened down 5/32 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 up 1 5/32 from its opening yesterday, but is currently down 1/32 this morning. I expect mortgage rates will improve by .125% - .25% from yesterday morning's opening.
Economic Reports Being Released Today:
- Leading Economic Indicators (LEI) for February - The index fell 0.4% last month, which is a little better than the 0.6% decline that economists had expected. The biggest contributors were continuing job losses and tumbling stock prices. Job losses are likely to continue to weigh down the index in the coming months. This suggests that economic activity will continue to slow down in the coming weeks. That is considered good news for bonds and mortgage rates.
- Jobless Claims - 655,000 new claims for jobless benefits were filed last week, a little more than the number of claims filed the previous week. The level of new claims filed has been steady for the past 7 weeks. However, continuing claims rose by another 185,000 in the first week of March to a record 5.3473 million, and has been rising for 9 straight weeks. This indicates that it's taking more time for the jobless to find work. With more people unemployed, the threat of wage based inflation is 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. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
- Fed's MBS Purchase Program - The results of this week's purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. To date, the Feds have purchased over $217 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.
Important News of the Day:
There are no more economic reports that will be released this week. Look for details on next week's economic data releases and events on my Weekly Mortgage Market Watch on Monday.
What Happening With Mortgage Rates Today:
Moderate Volatility. Overall, I'm expecting to see some movement in the stock and bond markets today and tomorrow. We had a huge rally in the bond and mortgage backed securities market yesterday afternoon, and there's potential for some profit taking.
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.
No one knows how long rates will stay down this time or if they'll go any lower. 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