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Daily Rate Lock Recommendation – 04/16/2010

April 16, 2010
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Friday’s bond market has opened in positive territory following early stock selling and weaker than expected economic news. The stock markets are showing significant weakness with the Dow down 104 points and the Nasdaq down 24 points. The bond market is currently up 7/32, which should improve this morning’s mortgage rates by approximately .125 of a discount point.

It appears that the stock markets may fall further, which should help boost bond prices throughout the day. I would not be surprised to see the major stock indexes move lower than current levels sometime today. If this is accurate, the bond market should benefit as investors seek safety from the volatility and I would not be surprised to see mortgage rates revise lower sometime this afternoon.

March’s Housing Starts was posted early this morning, showing that new construction starts rose 1.6% last month. This was a larger increase than was expected, giving us a sign of housing sector strength. However, this data is not considered to be highly important to the markets or mortgage rates and has not influenced this morning’s rates.

The second report of the day came from the University of Michigan who announced that their Index of Consumer Sentiment fell to 69.5 this month. This was well below forecasts of a 75.0 reading, meaning that consumers felt much worse about their own financial situations than many had thought. That usually translates into consumers delaying making a large purchase and helps limit economic growth. This is good news for the bond market and mortgage rates.

Next week is moderately busy in terms of relevant economic data being released. There are a couple of important reports scheduled, including a very important inflation index. Unlike most Monday’s there is data being posted Monday that may influence mortgage pricing. March’s Leading Economic Indicators (LEI) will be released late Monday morning. Look fo r more details on this report and the rest of next week’s events in Sunday’s weekly preview.

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 between 8 and 20 days… Float if my closing was taking place between 21 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 all/any other borrowers.

©Mortgage Commentary 2010

Daily Rate Lock Recommendation – 04/13/2010

April 13, 2010
By

Tuesday’s bond market has opened in positive territory again as the stock markets show minor losses after disappointing earning results from Dow component Alcoa. The Dow is currently down 14 points, but more importantly has fallen below the 11,000 mark it finally closed above yesterday. The Nasdaq is down 5 points. The bond market is currently up 4/32, which with yesterday’s late strength should improve this morning’s mortgage rates by approximately .250 – .375 of a discount point.

There was economic data posted today but it is not considered to be important to mortgage rates. February’s Goods and Service Trade Balance was posted early this morning, revealing a larger than expected trade deficit of 39.7 billion. Since this data is aged and indirectly affects the bond market, it has had little impact on this morning’s mortgage rates.

Tomorrow’s data is a different story though. The Commerce Department will release March’s Retail Sales data early tomorrow morning. This report gives us a measurement of consumer spending, which is very important because consumer spending makes up two-thirds of the U.S. economy. Forecasts are calling for a 1.2% increase in sales last month. If we see a larger increase in spending, the bond market will probably fall and mortgage rates will rise. However, weaker than expected results could push bond prices higher and mortgage rates lower tomorrow.

March’s Consumer Price Index (CPI) will also be released early tomorrow morning. This index is one of the most important pieces of data we see each month. It measures inflationary pressures at the consumer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors because it erodes the value of their future fixed interest payments. This leads to bond selling and higher mortgage rates. There are two readings in the index that traders watch. The first is the overall readi ng while the second is the more important core data reading that excludes more volatile food and energy prices. Analysts are expecting to see a 0.1% increase in both readings. If we see larger increases, we could get higher mortgage rates tomorrow.

These reports are both important enough to cause significant movement in rates. Therefore, if we get conflicting readings, they could offset each other. That could mean little change in rates tomorrow. However, if they both show favorable or unfavorable results, we will likely see a noticeable change in mortgage pricing tomorrow. Therefore, please maintain contact with your mortgage professional if still floating an interest rate.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 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 all/any other borrowers.

©Mortgage Commentary 2010

Daily Rate Lock Recommendation – 04/12/2010 11:59:00 AM EST

April 12, 2010
By

Monday’s bond market has opened in positive territory despite minor gains in stocks. The stock markets are showing optimism ahead of this week’s earning announcements with the Dow up 14 points and the Nasdaq up 2 points. The bond market is currently up 8/32, which should improve this morning’s mortgage rates by approximately .250 – .375 of a discount point.

This week brings us the release of seven relevant economic reports for the bond market to digest, but none are scheduled for release today. It also is the beginning of quarterly earnings season, which could lead to fluctuations in the stock markets. If earnings come in lighter than estimates, the stock markets may fall, leading to an influx of funds into bonds. But, if earnings and forecasts are strong, the major stock indexes may rally, pulling funds from bonds and leading to higher mortgage rates.

The first report of the week comes early tomorrow morning but it is the least important of the seven. February’s Goods and Service Trade Balance will be posted tomorrow. This data gives us the size of the U.S. trade deficit, but unless it varies greatly from forecasts, it likely will not cause much movement in mortgage rates. Current forecasts show a $39.0 billion trade deficit.

The first important report will be released early Wednesday morning when the Commerce Department will release March’s Retail Sales data. This piece of data gives us a measurement of consumer spending, which is very important because consumer spending makes up two-thirds of the U.S. economy. Forecasts are calling for a 1.1% increase in sales last month. If we see a larger increase in spending, the bond market will probably fall and mortgage rates will rise. However, a weaker than expected reading could push bond prices higher and mortgage rates lower Wednesday.

Also scheduled for release Wednesday is March’s Consumer Price Index (CPI). This index is one of the most impo rtant pieces of data we see each month. It measures inflationary pressures at the consumer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors because it erodes the value of their future fixed interest payments. This leads to bond selling and higher mortgage rates. There are two readings in the index that traders watch. The first is the overall reading while the second is the more important core data reading that excludes more volatile food and energy prices. Analysts are expecting to see a 0.1% increase in both readings. If we see larger increases, we could get higher mortgage rates Wednesday.

Overall, look for the most movement in rates the middle part of the week. The Retail Sales and CPI reports are the biggest names on the agenda. Either of them can cause significant movement in the markets and mortgage rates, so the fact that they are being posted on the same day makes Wednesday the most important of the week. Look for the stock markets to influence bond trading and mortgage rates the first part of the week, but we can expect to see the most movement in rates the latter part. I am expecting it to be an active week for the mortgage market, so please maintain contact with your mortgage professional if still floating an interest rate.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 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 all/any other borrowers.

©Mortgage Commentary 2010

Daily Rate Lock Recommendation – 04/02/2010

April 2, 2010
By

Friday’s bond market has opened in negative territory after this morning’s Employment report showed a sizable improvement in the labor market. The stock markets are closed today in observance of the Good Friday holiday, but the bond market will be open until noon ET. It is currently down 12/32, which will likely lead to an increase of approximately .250 of a discount point in this morning’s mortgage rates. However, many lenders may be closed today due to the holiday and will need to reflect this change in Monday’s pricing.

This morning’s data did show a significant improvement from February’s readings. But when compared to forecasts, this data should be considered favorable for bonds. The report showed that the unemployment rate remained at 9.7% as it was expected to. The number of new jobs added to the economy during March totaled 162,000. This was short of the 184,000 that was expected after adjusting for an upward revision to February’s total. It sh ould be safe to assume that the market was priced for those forecasts. In addition, nearly a third of the new jobs are thought to be only temporary Census workers and not permanent positions that can be relied on in the future.

So, we saw fewer jobs added than expected and the unemployment rate remained unchanged. This should be considered good news for bonds, or at least neutral. I believe that the thin holiday trading is skewing the market’s reaction to the news. Many traders are home today for the holiday, leaving a skeleton staff at the office. The weak volume magnifies any selling that does take place. The result is a larger loss in bonds than we would likely see if the stock markets were open and full trading staffs were working today. We could see this corrected in Monday’s trading when stocks begin trading and traders return from the long weekend.

Next week is very light in terms of economic releases. There is very little factual data sc heduled to be posted. The major events are the minutes from the most recent FOMC meeting and a couple of Treasury auctions. Look for more details on next week’s event in Sunday’s weekly preview.

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 between 8 and 20 days… Float if my closing was taking place between 21 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 all/any other borrowers.

©Mortgage Commentary 2010

Daily Rate Lock Recommendation – 03/10/2010

March 10, 2010
By

Wednesday’s bond market has opened in negative territory as investors prepare for today’s Treasury auction. The stock markets are showing minor gains again with the Dow up 13 points and the Nasdaq up 7 points. The bond market is currently down 8/32, which will likely push this morning’s rates higher by approximately .125 – .250 of a discount point.

There is no relevant economic data scheduled for release today. The 10-year Treasury Note auction is being held today and could influence mortgage rates later. It is common to see some weakness ahead of these important sales as participants look to protect themselves against potential volatility. This is especially true when there is not a high expectation of a strong sale. However, if the sales are met with decent demand, it is also common to see the morning losses erased during afternoon trading.

Results of today’s auction will be posted at 1:00 PM ET. If investor demand for the 10-year Notes was h igh, we may see bonds rally during afternoon trading, possibly improving mortgage rates this afternoon. But, is the sale was met with weak interest, selling in bonds could precede an increase to mortgage pricing. The results of recent sales do not give us much to look forward to, so it is not likely that these auctions will fuel a bond rally today. We also get to repeat the process tomorrow for the 30-year bond auction.

Tomorrow brings us the release of two relatively minor economic reports. January’s Goods and Services Trade Balance is the first. It gives us the size of the U.S. trade deficit and is expected to show a $41.0 billion deficit. It is the week’s least important piece of news and likely will not influence mortgage rates much.

Also early tomorrow morning is the weekly release of unemployment figures from the Labor Department. They are expected to say that 460,000 new claims for unemployment benefits were filed last week, which would be a decline from the previous week. The larger the number, the better the news for bonds and mortgage pricing. However, since it tracks only a week’s worth of new claims, it usually takes a wide variance between forecasts and the actual total for it to affect mortgage rates.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 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 all/any other borrowers.

©Mortgage Commentary 2010

Mortgage Market News for the week ending February 19, 2010

February 19, 2010
By
     
Fed Comments Push Mortgage Rates HigherWhile investors began the week watching for fresh information about Greece and China, the Fed stole the spotlight on Wednesday with news that was unfavorable for mortgage markets, and mortgage rates ended the week moderately higher.

The Fed currently has significant influence on mortgage rates. Over the last year, the Fed pushed mortgage rates lower by purchasing over $1 trillion in mortgage-backed securities (MBS). Wednesday, the Fed’s Plosser suggested that the Fed should begin selling those MBS “sooner rather than later.” Later that day, the Fed released the detailed minutes from the January 27 Fed meeting. The minutes revealed that “several” Fed officials favored starting the sale of the Fed’s MBS portfolio “in the near future.” Investors were not expecting that Fed MBS sales would begin any time soon. Quite simply, adding to the supply of MBS being sold means that yields would need to move higher to attract buyers. Since mortgage rates are largely determined by MBS yields, mortgage rates rose after the news.

Thursday, the Fed announced an increase in the discount rate, the emergency rate at which banks borrow money from the Fed. The Fed made clear that this in no way reflected a change in broader monetary policy or its economic outlook. This was simply a return to more normal levels for one Fed tool now that the financial crisis has eased. As a result, there was very little impact on mortgage rates. According to Fed officials, a move to begin to tighten overall monetary policy, which almost certainly would cause a significant reaction, is still expected to be at least several months away. The inflation data released this week continued to show low levels of current inflation, providing little pressure for the Fed to rush to take action.

 

 
 Also Notable:

  • January Core CPI inflation increased at a tame 1.6% annual rate
  • January Housing Starts increased 3% to the highest level in six months
  • The Treasury will auction $118 billion in 2-yr, 5-yr, and 7-yr securities next week
  • The Fed purchased $11 billion in agency MBS, with about $55 billion more to go
     
 

 

 
Average 30 yr fixed rate:
Last week: +0.02%  
This week: +0.10%  
Stocks (weekly):
Dow: 10,400 +300
NASDAQ: 2,250 +75

 

   Week AheadNext week, New Home Sales will be released on Wednesday. Durable Orders, an important indicator of economic activity, will come out on Thursday. Friday will be the biggest day for economic data with Existing Home Sales, Preliminary GDP, and the Chicago PMI manufacturing index. Consumer Sentiment and Consumer Confidence will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Finally, Fed Chief Bernanke is scheduled to speak on Wednesday.

Daily Rate Lock Recommendation – 02/18/2010

February 18, 2010
By

Thursday’s bond market has opened in negative territory again following stronger than expected inflation news. The stock markets are showing gains with the Dow up 18 points and the Nasdaq up 6 points. The bond market is currently down 9/32, which will likely push this morning’s mortgage rates higher by approximately .375 of a discount point.

The Labor Department reports that January’s Producer Price Index (PPI) rose 1.4% while the core data reading rose 0.3%. Both of these readings were well above forecasts, meaning inflationary pressures were stronger at the producer level of the economy than many had thought. This is certainly bad news for the bond market and mortgage rates because inflation erodes the value of a bond’s future fixed interest payments, making them less appealing to investors. They are then sold at a discount, leading to higher yields and rising mortgage rates.

The Conference Board gave us January’s Leading Economic Indicators ( LEI) late this morning. They announced a 0.3% increase that was below expectations. That means that the data is predicting a slower pace of economic growth over the next several months than the markets were expecting. This can be considered good news for bonds, but this data is not nearly important to the markets than the PPI reading was.

Yesterday’s afternoon release of the FOMC meeting minutes didn’t reveal many surprises. The most notable was a minor upward revision of their expectation for this year’s unemployment rate. They also reiterated a prolonged period of high unemployment and slightly raised inflation targets for this year. But the news was not welcomed in the bond market and is likely contributing to today’s selling, especially after this morning’s stronger than expected inflation readings.

The Labor Department will be in the forefront again tomorrow when they post the more important Consumer Price Index (CPI) for January. This index measures inflationary pressures at the very important consumer level of the economy compared to today’s release that measured the producer level. With exception to maybe the Employment report, the CPI is the most important report that we see each month. Its results can have a huge impact on the financial markets, especially on long-term securities such as mortgage-related bonds. It is expected to show a 0.3% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall. However, after today’s PPI results, traders may be skeptical of getting favorable results tomorrow.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 and 60 days… Lock 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 all/any other borrowers.

©Mortgage Commentary 2010

Do you need daily mortgage news ?

February 16, 2010
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Wondering About Mortgage Interest Rates

I don’t cry I just call CU Mortgage Division

February 7, 2010
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Dont Cry Just Call CU Mortgage Division

Mortgage Market News for the week ending February 6, 2010

February 7, 2010
By
     
Mortgage Rates Improve on Global Concerns

The biggest influence on mortgage rates this week came from outside the US. Concerns about the possible default of sovereign debt in smaller nations caused investors to seek the relative safety of US fixed income securities. This week’s economic data was roughly balanced in terms of positive and negative surprises. The added demand for safer investments helped mortgage rates move lower during the week.

The recession has impacted countries in different ways. Some of the hardest hit have been smaller European nations, such as Greece and Spain. As members of the European Union, they must adhere to certain restrictions which limit their flexibility to adjust domestic economic policy. As a result, some countries may be at risk of defaulting on government debt. Investors responded by buying relatively safer assets such as US bonds, including agency mortgage-backed securities (MBS). Investors also withdrew money from global stock markets during the week. In the US, the Dow fell about 200 points.

Friday’s important Employment report contained mixed news. Against a consensus forecast for a gain of 15K jobs, the economy lost -20K jobs in January. The big story, though, was an unexpected drop in the Unemployment Rate to 9.7% from 10.0% in December. Two separate sources of data are used to compute the change in jobs and the change in the unemployment rate, and during volatile periods the two methods can show widely divergent results. The decline in the unemployment rate in January was viewed as very good news by many economists, pointing to an improving labor market. On a more negative note, revisions to older data showed that the economy has lost 8.4 million jobs since the start of the recession in December 2007, from the previous reported level of 7.2 million.

 

 
 

Also Notable:

  • The Unemployment Rate dropped to the lowest level since August
  • December Pending Home Sales, a leading indicator, rose 1.0%
  • The Treasury will auction $81 billion in 3-yr, 10-yr, and 30-yrs next week
  • The Fed purchased $12 billion in agency MBS during the week ending 2/3
     
 

 

 
Average 30 yr fixed rate:
Last week: +0.05%  
This week: -0.05%  
Stocks (weekly):
Dow: 9,950 -200
NASDAQ: 2,125 -50

 

   Week Ahead

It will be a light week for economic data next week. The biggest report will be Thursday’s Retail Sales data. Retail Sales account for about 70% of economic activity. The Trade Balance will come out on Wednesday, and Consumer Sentiment will be released on Friday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday.