Daily Mortgage Rate Lock Advisory

Thursday’s bond market has opened in negative territory as yesterday’s afternoon weakness continues into this morning’s trading. The stock markets are showing gains with the Dow up 82 points and the Nasdaq up 2 points. The bond market is currently down 17/32, which will likely push this morning’s mortgage rates higher by approximately .375 of a discount point over yesterday’s morning rates.

The Labor Department reported early this morning that 608,000 new claims for unemployment benefits were filed last week. This was slightly higher than what analysts had expected, but not enough of a difference to have much influence on mortgage pricing.

The Conference Board gave us today’s second piece of news with the release of its Leading Economic Indicators (LEI) for May. It revealed a 1.2% increase that exceeded forecasts and points towards a sharp increase in economic activity over the next three to six months. This is bad news for bonds because strengthening economic activity makes bonds less appealing to investors and leads to higher mortgage rates.

Yesterday’s morning rally in bonds was short-lived as trading turned sour as the day went on. What looked like a potentially wonderful day for mortgage shoppers ended up being a bad day. A combination of a couple of factors led to the selling, including a weakening dollar that makes U.S. securities less valuable to international investors. The negative tone has carried into this morning’s trading and with no important economic data this afternoon or tomorrow to stop the selling, we may see mortgage rates revise higher this afternoon and possibly tomorrow.

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…

Rate Lock Advisory – Thursday Mar. 19th

Thursday’s bond market has opened in positive territory this morning as yesterday’s afternoon news has continued into this morning’s trading. The stock markets are not boding so well with the Dow down 37 points and the Nasdaq down 3 points. The bond market is currently up 7/32, which will likely keep mortgage rates near yesterday’s afternoon pricing. Overall, this morning’s rates should be approximately .625 of a discount point lower than yesterday’s morning rates. This equates to an improvement of a little more than .125 of a percent in rate.

Today’s economic data did not heavily influence trading or mortgage rates. The Labor Department gave us weekly unemployment claim figures, saying that 646,000 new claims for benefits were filed last week. This was a little lower than expected, but offsetting that number was news that the number of continuing claims reached a record number. Generally speaking, this data is not considered to be of high importance to the markets, so its impact on rates is usually limited.

The second piece of news was February’s Leading Economic Indicators (LEI). The Conference Board reported that the index fell 0.4% last month, which was stronger than the 0.6% decline that was expected. However, they also revised January’s reading weaker by 0.3%, effectively making this morning’s results a non-factor in the markets. But it does indicate that economic conditions are expected to weaken moderately over the next several months and that is favorable for bonds.

There is no relevant economic news scheduled for release tomorrow. I would not be surprised to see the bond market give back a little of this week’s gains as the markets stabilize. This could lead to a small increase in mortgage rates if true. Therefore, we may want to consider locking an interest rate if closing in the immediate future. The longer-term out look is still quite favorable for mortgage shoppers in my opinion t hough.

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 2009

Rate Lock Advisory – Wednesday Mar. 18th

WEDNESDAY AFTERNOON UPDATE:

This week’s FOMC meeting has adjourned with some extremely favorable news regarding the Fed’s investment in Treasury securities and mortgage-related bonds. As expected, there was no change made to key short-term interest rates but the post-meeting statement did mention that economic conditions were worse now than at the time of their last meeting in January. They again mentioned concerns about deflation, meaning inflation is not a threat in their minds.

The big news was the size of the investment that the Fed is going to be making in mortgage-related bonds and securities. In a direct effort to push different interest rates lower, including corporate lending and residential mortgage rates, the central bank will be buying up to $300 billion in longer-term bonds over the next six months. They also said that they plan to purchase $750 billion in mortgage backed securities so free up more capital for mortgage lending. T his will likely give the housing and mortgage sectors a much needed boost.

The effect this news had on today’s trading was extremely positive for mortgage shoppers. The stock markets have rebounded with the Dow up approximately 50 points and the Nasdaq up 25 points. Both indexes were well in negative territory this morning. The bond market has had an even better reaction to the news. It is currently up a whopping 4 7/32 (135/32) to drive its yield lower by .47%. That is a huge swing and should equate to a very significant improvement to mortgage rates shortly.

Earlier today, the Labor Department gave us the week’s most important economic data with the release of February’s Consumer Price Index (CPI). It showed a 0.4% rise in the overall reading and a 0.2% increase in the core data reading. Both readings were slightly stronger than expected, indicating prices at the consumer level of the economy were higher than thought. While that is bad news fo r bonds and mortgage rates because inflation erodes the value of a bond’s future fixed interest payments, the market downplayed the data in this morning’s trading, looking forward to this afternoon’s FOMC results.

The Conference Board will post its Leading Economic Indicators (LEI) for February late tomorrow morning, but I suspect that today’s rally and news will carry into tomorrow’s morning trading and influence rates more than this report will. The LEI attempts to measure economic activity over the next three to six months. Current forecasts are calling for a 0.6% decline, indicating that economic activity will likely slow in the coming weeks. That would be good news for the bond market and mortgage rates generally speaking, but today’s news will probably dominate trading tomorrow regardless of the results of the LEI.

If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… Float if my clos ing 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 2009

Rate Lock Advisory – Wednesday Dec. 31st

Wednesday’s bond market has opened in negative territory following morning gains in stocks. The stock markets are looking to close a very rough year on a positive note with the Dow up 75 points and the Nasdaq up 20 points. The bond market is currently down 14/32, but we will see an improvement in this morning’s mortgage rates of approximately .250 – .375 of a discount point due to strength late yesterday.

The Labor Department did give us a surprise in this morning’s release of weekly unemployment figures. They reported that new claims for benefits fell drastically last week. They were expected to be at 575,000, but today’s release announced that only 492,000 new claims were filed. Fortunately, this data is not considered to be of high importance to the markets therefore the impact on mortgage rates has not been significant.

The bond market will close early today ahead of the New Year’s Day holiday tomorrow and will remain closed until Friday mo rning. The stock markets will also be closed tomorrow.

The Institute for Supply Management’s (ISM) manufacturing index will be released late Friday morning. This highly important index measures manufacturer sentiment. A reading below 50 means that more surveyed manufacturing executives felt that business worsened during the month than those who felt it had improved. Analysts are currently expecting to see a 35.4 reading in this month’s release, meaning that sentiment fell from November’s 36.2. A smaller reading will be good news for the bond market and mortgage shoppers while a higher than expected reading could lead to higher mortgage rates Friday morning.

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.

Rate Lock Advisory – Thursday Dec. 4th

Thursday’s bond market has opened in positive territory following the release of weaker than expected economic news and a lackluster open in stocks. The stock markets are currently mixed with the Dow down 15 points and the Nasdaq up 6 points. The bond market is currently up 8/32, which will likely improve this morning’s mortgage rates by approximately .250 of a discount point.

The Commerce Department said late this morning that October’s Factory Orders fell 5.1%. This was the third consecutive month of a decline in new orders and a larger drop than analysts had expected. Forecasts were calling for a drop of 4.5% in orders, meaning that the manufacturing sector was weaker than thought. While this is good news for the bond market and mortgage rates, this data is no considered to be of high importance so its impact on trading and mortgage pricing was fairly minimal.

Earlier this morning, the Labor Department gave us last week’s weekly unemployment claim figures. They reported a drop in new claims, pegging the total at 509,000 compared to forecasts of 540,000 new claims. But, since this data tracks only a week’s worth of new claims, it is also not considered to be of high importance to the markets.

The Labor Department will also post November’s Employment report early tomorrow morning. This is arguably the most important monthly report we see. It is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for another upward change in the unemployment rate to 6.8%, payrolls down approximately 325,000 and an increase of 0.2% in average earnings. An ideal scenario for mortgage shoppers would be a higher unemployment rate than 6.8%, a larger decline in jobs and no change in the earnings portion.

Regardless of its results, look for tomorrow morning’s r eport to cause a fair amount of volatility in the markets and mortgage rates, especially if they vary much from forecasts.

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.

Rate Lock Advisory – Friday Nov. 7th

Friday’s bond market has opened in negative territory despite the release of a much weaker than expected Employment report. The stock markets are showing gains after a couple of sizable down days this week. The Dow is currently up 84 points while the Nasdaq has gained 17 points. The bond market is currently down 19/32, but we should still see an improvement in this morning’s mortgage rates of approximately .250 of a discount due to a strong rally in bonds late yesterday. This morning’s losses are taking back some of yesterday’s late gains, but mortgage rates are still lower than yesterday’s morning rates.

The Labor Department gave us some surprising readings this morning, saying that the U.S. unemployment rate jumped from 6.1% in September to 6.5% in October. They were expected to show a 6.3% unemployment rate. This was the highest rate of unemployment since March 1994.

The number of payrolls added or lost during the month also opened some eye s. The economy lost 240,000 jobs last month, which was worse than the 200,000 that was forecasted. But equally as bad was a large revision to September’s payrolls. What was previously announced as a loss of 159,000 jobs in September is now being estimated at 284,000. This was the 10th consecutive monthly drop in payrolls and brings the yearly total to 1.2 million jobs lost and the first time we have seen 1 million jobs lost since 2001.

Today’s report gives us little to be optimistic about in regards to the employment sector. It is becoming more and more clear to many analysts that the economy is actually in a recession despite the lack of an official announcement or other benchmark indicators. What is equally concerning is that many think the problems are going to get worse before better. This could be good news for bonds and mortgage shoppers, but the crazy volatility we have seen in the markets recently makes it very difficult to follow historical patter ns or make realistic predictions. There is little doubt that we will see more volatility in the coming weeks.

Next week is light in terms of the number of relevant economic reports scheduled for release. We will get some important data late next week, but the first part of the week there is nothing scheduled for release to be concerned with. This make sit very likely that the stock markets will be the biggest influence on bonds and mortgage rates the first couple of days of the week. But look for more details on next week’s event sin Sunday’s weekly preview.

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 an d cannot be guaranteed to be in the best interest of all/any other borrowers.

This week brings us the release of a couple important pieces of economic data in addition to some moderately important reports. There are a total of four or five reports that are worth watching and are most likely to affect mortgage rates.

The first is the Institute for Supply Management’s (ISM) manufacturing index late tomorrow morning. This highly important index measures manufacturer sentiment. A reading below 50 means that more surveyed manufacturing executives felt that business worsened during the month than those who felt it had improved. A sub-50 reading is also considered recessionary news. Analysts are expecting to see a 48.0 reading in this month’s release, meaning that sentiment slipped slightly during May. A smaller reading will be good news for the bond market and mortgage shoppers while an unexpected increase could contribute to higher mortgage rates.

Tuesday’s only relevant news is the Commerce Department’s release of April’s Factory Orders data. This manufacturing sector report is similar to last week’s Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn’t expected to cause much change in rates this month. Current forecasts are expecting to see an increase in orders of 0.1%.

The revised 1st Quarter Productivity and Costs report will be released Wednesday morning. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation. It is believed that the economy can grow with low inflationary pressures when productivity is high. Last month’s preliminary reading revealed a 2.2% rate, but I don’t think this piece of data will have much of an impact on the bond market or mortgage pricing unless it varies greatly from its forecasted reading of 2.5%.

The second report of the day may have a significant impact on the markets or be a non-factor depending on its result. The Institute for Supply Management will release its services index late Wednesday morning. It is expected to show a reading of 51.0, with the same principals as Monday’s manufacturing index. If this reading varies greatly from forecasts, we may see volatility in the markets and mortgage rates. However, if its results are in the general area of expectations, it will likely have no influence on the markets and mortgage pricing.

There is no relevant economic news scheduled for release Thursday, however, Friday’s sole report is arguably the single most important report that we see each month. The Labor Department will post May’s Employment data early Friday morning. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate climb to 5.1% with approximately 52,000 jobs lost during the month. A higher than expected increase in the unemployment rate and a larger drop in payrolls would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates Friday. But, stronger than expected numbers would likely lead to a spike in mortgage rates.

Overall, tomorrow or Friday are likely to be the most important days of the week as they bring us the two most important reports on the agenda. If they give us weaker than expected results, we will probably close the week with lower mortgage rates than tomorrow’s opening levels. However, if we see stronger than expected readings in those two releases, I expect mortgage rates to move higher on the week.

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.

This week brings us the release of only three pieces of economic news in addition to the minutes from the last FOMC meeting. Only one of those three can be considered of high importance to the markets and mortgage rates, so we may see a fairly calm week for mortgage rates.

The first data comes tomorrow morning with the release of April’s Leading Economic Indicators (LEI) at 10:00 AM ET. This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show no change from March’s reading, meaning that economic activity is likely to remain flat during the next few months. A decline would be good news for the bond market and mortgage rates, while an increase could cause mortgage rates to inch higher tomorrow.

The second report of the week April’s Producer Price Index (PPI) Tuesday morning, which helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.4%, while the core data that excludes food and energy prices is expected to rise 0.2%. A smaller than expected increase in the core data would be ideal for mortgage shoppers.

There is no relevant economic news scheduled for release Wednesday, but we will get to see the minutes from the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy. The goal is to form a guess about what the Fed’s next move will be. The minutes will be released at 2:00 PM ET, so if there is a market reaction to them it will be evident during afternoon trading.

The National Association of Realtors will give us the Existing Home Sales report Friday morning. This data tracks resales of homes in the U.S., giving us a measurement of housing sector strength. However, it is not considered to be of much importance to the bond market unless it varies greatly from forecasts. Current forecasts are calling for decline in sales between March and April.

Overall, it may be an interesting week for mortgage rates. We could see little movement in rates if the stock markets remain calm and the week’s data doesn’t reveal any major surprises. Tuesday’s PPI report is the single most important data of the week, but the FOMC minutes may also lead to some volatility in the markets. Also worth noting is an early close in the bond market Friday afternoon ahead of the Memorial Day Holiday Monday. These early closes sometimes lead to additional volatility bond prices as investors prepare for the long weekend and trading thins with many traders starting the weekend early.

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.

Friday’s bond market has opened well into negative territory following early stock strength. Stocks are rallying in to the weekend with the Dow up 230 points and the Nasdaq up 60 points. The bond market is currently down 20/32, which will likely push this morning’s mortgage rates higher by approximately .375 of a discount point over yesterday’s morning rates.

There is no relevant data scheduled for release today, so the likelihood of bonds reacting to stock movements was fairly high. This means that the rally in the major stock indexes translates into bad news for mortgage shoppers this morning. The stock rally has caused investors to sell bond holdings, leading to this morning’s losses and mortgage rate increases.

Next week is very light in terms of economic releases scheduled to be posted. There are only three factual reports on the agenda along with a couple of Treasury auctions that sometimes influence bond trading. The first report is not scheduled for release until Wednesday morning, meaning stocks will likely be a major influence on bond trading and mortgage rates the first part of the week.

Look for more details on next week’s data and 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 2008