WEDNESDAY AFTERNOON UPDATE:

This week’s FOMC meeting has adjourned with no change to key short-term interest rates. This was widely expected by market participants. The post-meeting statement really didn’t give us any new insight to the Fed’s next move. It did renew the same thoughts previously mentioned- that the economy is leveling off but to expect weak economic conditions for the immediate future. They also indicated that inflation is not an immediate concern to the economy.

The lack of a change to rates had no impact on trading as it was expected. The portion of the statement that indicated the spiraling economy is stabilizing can be considered somewhat negative for the bond market. However, the lack of concern about inflationary pressures offset any concerns that may have arisen from the reminder than the economic downturn is slowing.

Today’s 10-year Treasury Note auction has caused some stress in bonds during afternoon trading though. The sale was met with an average demand at best. The results were far from the worst we have seen but also nowhere near the recent levels of interest. This led to bond prices falling immediately after the 1:00 PM ET announcement and the FOMC meeting has done nothing to push them higher. Overall, I am expecting to see a small upward revision to mortgage rates this afternoon. If your lender does not revise higher today, it will be built into tomorrow’s pricing. Some lenders may opt to wait for tomorrow morning’s key economic data to be posted before reflecting this change. If that is the case, keep in mind you already have a slight increase waiting from this afternoon’s events.

This morning’s only relevant economic data was June’s Trade Balance report that revealed a $27.0 billion deficit. This was smaller than expected, but this data is not considered to be highly important to the markets so its impact on this morning’s trading and mortgage rates was minimal.

Tomorrow morning’s sole monthly report is July’s Retail Sales data. This data is very important to the financial markets and mortgage rates because it helps us measure consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any data related to it can cause a fair amount of movement in the markets. A smaller than expected increase would indicate that consumers are spending less than previously thought, potentially slowing the economic recovery. This is good news for the bond market and mortgage rates as it eases inflation concerns and makes long-term securities such as mortgage-related bonds more attractive to investors. Current forecasts are calling for an increase of 0.7%.

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 – Tuesday Mar. 10th

Tuesday’s bond market has opened in negative territory with stocks rallying behind favorable earnings news from Citigroup. The Dow is currently up 254 points while the Nasdaq has gained 60 points. The bond market is currently down 24/32, but I am expecting to see an increase in this morning’s mortgage rates of approximately .125 – .250 of a discount point.

The news that banking giant Citigroup was profitable the first two months of the year has led to rally in many sectors that have been hit hard due to economic and stability news. Whether or not this rally is the beginning reversal for stocks or if this is just a good day in a bad quarter remains to be seen. It will be interesting to see if the major indexes can hold this morning’s gains during afternoon trading and over the next few days. If not, look for more selling in stocks that could benefit bonds and mortgage rates. However, if they continue to rise, we may see pressure in bonds that lead to high er mortgage rates in the near future.

There is no relevant economic data scheduled for release again today. The rest of the week brings us the release of three economic reports for the bond and mortgage markets to digest along with 10-year Treasury Note and 30 year Bond auctions. The first will be held tomorrow with results posted at 1:00 PM. It is fairly common to see weakness in bonds right before the sales as trading firms prepare for them. If the auctions are met with a strong demand, that weakness is usually erased almost immediately.

The most important of the three reports will be posted Thursday morning when February’s Retail Sales data is released. This report is extremely important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, data that is related usually has a big impact on the financial markets. This month’s report is expected to show a decline in sales of a pproximately 0.4%. If it reveals a larger decline in sales, the bond market should rise and mortgage rates will likely fall. If it reveals an increase, I expect to see bond prices fall and mortgage rates rise Thursday 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… 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 Jan. 28th

WEDNESDAY AFTERNOON UPDATE:

Today’s FOMC meeting adjourned with no change to key short-term interest rates, keeping the benchmark Fed Funds Rate near 0%. The stock markets rallied following the adjournment, pushing the Dow up 200 points and the Nasdaq higher by 53 points on the day. The bond market soured though, driving bond prices lower that pushed yields and mortgage rates higher. Overall, we can expect to see an increase in tomorrow’s mortgage rates of approximately .375 of a discount point unless the morning’s data offsets those losses or pushes them higher.

The post meeting statement did give us some insight into what actions the Fed may take to help boost economic activity since this rate can’t be lowered any further. They indicated that they were ready to buy longer-term government securities such as the 10-year Treasury Note and 30 year Bond if they felt that it would generate lending. This is actually good news as it creates another buyer for all the debt that could some to market to pay for the stimulus package currently being considered. Unfortunately, the statement was not very definitive, more or less saying that it is an option available not a commitment to do so.

The statement also hinted at the Fed’s forecast for the economy, saying that significant risks still remain but that a ?gradual recovery? could begin late this year. In other words they expect the economy to continue to slow for most of the year before slowly rebounding. That is actually fairly favorable news for bonds, but traders apparently were disappointed by the lack of solid details of what the Fed will do, particularly regarding the possibility or likelihood of buying government securities. The result was a weak afternoon for bonds and a likely upward revision to mortgage pricing.

Tomorrow morning brings us the release of December’s Durable Goods Orders. This data helps us measure manufacturing strength by tracking new orders at U.S. factories for products that are expected to last three or more years. The data often is quite volatile from month to month, but is currently expected to show a decline in orders of 2.0%. A larger than expected drop would be good news for bonds and mortgage rates.

December’s New Home Sales report, the sister release to Monday’s Existing Home Sales, will be posted late tomorrow morning. It is expected to show another decline in sales of new homes, but is not important enough to heavily influence mortgage pricing.

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 guaran teed to be in the best interest of all/any other borrowers.

Rate Lock Advisory – Sunday Jan. 4th

This week bring us the release of only two monthly reports that are relevant to the bond market and mortgage rates. However, in addition to those two reports, we also will see the minutes from the last FOMC meeting and a couple of Treasury auctions that may influence bond trading and possibly mortgage rates.

The first of the two reports will be posted late Tuesday morning when the Commerce Department releases November’s Factory Orders data. This data gives us a fairly important measurement of manufacturing sector strength. It is similar to the Durable Goods Orders release that was posted late last month, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see a decline of 2.6% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a minor change in rates.

Also Tuesday will be the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed’s thinking and concerns regarding inflation and monetary policy. It may also help form opinions of the Fed’s future moves toward interest rates, even though the Fed appears to be running out of options. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they shouldn’t affect the markets or mortgage rates until afternoon hours.

There are two Treasury auctions that are worth watching also. The 10-year TIPS Notes (inflation-indexed securities) will be auctioned Tuesday while the traditional 10-year Treasury Note will be sold Thursday. If investor demand for these sales is strong, we should se e bonds strengthen during afternoon trading those days and possibly improve mortgage rates slightly. However, a lackluster interest in the sales could cause bond prices to fall and mortgage rates to move higher following the announcement of the sale results.

The final report of the week comes Friday morning when the Labor Department will post December’s employment figures. The Employment report is considered to be one of the most important monthly releases we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a larger than expected drop in new payrolls and a small increase or even a decline in earnings would be good news for the bond market.

Current forecasts call for a 0.3% increase in the unemployment rate, pushing it to 7.0%. Analysts are expecting to see a drop in payrolls in the neighborhoo d of 475,000 with earnings rising 0.2%. If we see weaker than expected results, mortgage rates should improve Friday. However, stronger than expected readings will likely push mortgage rates higher.

Overall, the key data of the week will be Friday’s Employment report, but look for Tuesday to be important with the economic data, FOMC minutes and one of the two more important Treasury auctions. If they give us favorable results, mortgage rates will likely move lower for the week. But if not, we will probably see mortgage rates move higher again.

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 guarante ed to be in the best interest of all/any other borrowers.

Rate Lock Advisory – Tuesday Dec. 23rd

Tuesday’s bond market has opened flat after this morning’s economic data failed to show any major surprises. The stock markets are reacting similarly with the Dow down 16 points and the Nasdaq nearly unchanged from yesterday’s close. The bond market is also practically unchanged but we will still see an increase in this morning’s rates of approximately .250 – .375 of a discount point.

The first of today’s four reports was the final revision to the 3rd Quarter GDP that showed a 0.5% decline. This matched forecasts but was not likely to significantly impact mortgage pricing anyhow. The data is quite aged by now and next month we get the initial reading on this quarter’s activity, so analysts do not pay much attention to this version of the report unless it varies greatly from forecasts.

November’s Existing and New Home Sales reports were both posted this morning and both revealed larger than expected drops in sales. This indicates that the housin g sector is still softening and not near the ?floor? that many are attempting to predict. However, this is good news for bonds and mortgage rates because a weakening housing sector will make slow the economic recovery and keeps inflation fears to a minimal.

The last report of the day did reveal a higher than expected level of consumer sentiment. The University of Michigan’s Index of Consumer Sentiment for December was revised and showed a higher level of sentiment than the previous estimate. The reading of 60.1 means that consumers were more optimistic about their own financial situation than many had thought. This is considered bad news for bonds because rising sentiment means that consumers are more apt to make large purchase sin the near future. Still, this report ha snot had a significant impact ton today’s trading.

The last event of the day is the 5-year Treasury Note auction. If the sale is met with a decent demand from investors, we could se e interest in other notes and bonds such as mortgage-related bonds increase during afternoon trading. But, a lackluster interest from investors may also lead to weakness in bonds and possible upward afternoon revisions to mortgage pricing.

Tomorrow morning brings us the release of November’s Durable Goods Orders and the Personal Income and Outlays report. The Durable Goods Orders report tracks new orders for big-ticket items and is expected to show a drop of 3.1%. The Income and Outlays report is likely to show that personal income was unchanged from October and that spending fell 0.8% last month. Weaker readings would be good news for the bond market and mortgage rates.

Also worth noting is an early close tomorrow ahead of the Christmas Day holiday. The markets will be closed Thursday in observance of the holiday but will be open Friday. The bond market will close early Friday also. However, I am expecting to see a very quiet couple of days as many traders are home for the holidays.

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. 11th

Thursday’s bond market has opened in positive territory following weaker than expected numbers in some minor economic reports and a fairly uneventful morning in stocks. The stock markets are flat with the Dow currently nearly unchanged and the Nasdaq down 6 points. The bond market is currently up 11/32, which will likely improve this morning’s mortgage rates by approximately .375 of a discount point.

Neither of today’s reports are considered to be market movers, so their results have had little impact on this morning’s mortgage pricing. The first was October’s Goods and Services Trade Balance report that showed a trade deficit of $57.2 billion. This was much larger than the $53.5 billion deficit that was expected. However, we have not seen this news affect trading or mortgage rates today.

The second was last week’s unemployment claims figures by the Labor Department. They reported that 573,000 new claims for benefits were filed last week, grea tly exceeding forecasts. This is also a 26 year high for new claims, meaning that the employment sector may still be weakening. This is generally good news for bonds and mortgage rates, but since the data tracks only a week’s worth of claims it usually does not heavily influence the markets.

Also worth mentioning is the 10-year Treasury Note auction today that may hurt or help boost bond prices, depending on how strong of a demand there is in the sale. Results will be posted at 1:00 PM ET. If there was a strong demand for the sale, we may see bonds move higher and mortgage rates revise lower during afternoon trading. However, a lackluster interest could lead to higher mortgage pricing.

Tomorrow morning brings us the release lf November’s Retail Sales report. This data is very important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts call for it to show a 2.0% decline in sales from October’s levels. If it reveals weaker than expected sales, the bond market should thrive and mortgage rates should fall as a result. A stronger than expected reading could fuel stock market gains and push mortgage rates higher tomorrow morning.

Also tomorrow and just as important as the sales data, the Labor Department will release November’s Producer Price Index (PPI). This index measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If tomorrow’s release reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and should drive mortgage rates higher. If we see in-line or weaker tha n expected numbers, the bond market should fair well and mortgage rates should fall. Current forecasts are showing a 2.0% drop in the overall index and a 0.1% rise in the core data.

The fourth and final report of the week is December’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment late tomorrow morning. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly. However, with the Retail Sales and PPI reports out before this data, I don’t expect it to affect mortgage rates much. It is expected to show a reading of 55.0, which would be a small decline from last month’s final reading.

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 c losing 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 – Tuesday Dec. 9th

Tuesday’s bond market has opened flat with no relevant economic news scheduled for release today. The stock markets are mixed with the Dow down 103 points and the Nasdaq up 12 points. The bond market is currently nearly unchanged from yesterday’s close, but we will still see an increase in this morning’s mortgage rates of approximately .250 of a discount due to weakness late yesterday.

This week is moderately busy in terms of the number of economic releases scheduled for release. There are four on the agenda but two of them are considered to be very important that can heavily influence the markets and mortgage pricing. In addition, there is a 10-year Treasury Note auction Thursday that may hurt or help boost bond prices, depending on how strong of a demand there is in the sale. Since all of the data is scheduled for release Thursday and Friday, the most movement in rates will likely be the latter part of the week.

There is no relevant economic n ews scheduled for release today or tomorrow. The first data is October’s Goods and Services Trade Balance report early Thursday morning. This report gives the size of the U.S. trade deficit, but it is the week’s least important release. It is expected to show a $54.0 billion trade deficit. Unless it varies greatly from forecasts, I don’t expect it to affect mortgage pricing.

Friday brings us the release of all of this week’s important data with November’s Retail Sales and Producer Price Index (PPI) being posted. I am expecting to see the most movement in rates Friday, but I believe the general atmosphere for mortgage rates is still negative.

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 m y 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 – Monday Dec. 1st

Monday’s bond market has opened strong following weaker then expected economic news and a major sell-off in stocks. The stock markets are kicking the month off in the tank with the Dow down almost 400 points and the Nasdaq down 81 points. The bond market is currently up 30/32, which will likely improve this morning’s mortgage rates by approximately .500 of a discount point.

The week’s first piece of economic news was November’s manufacturing index from the Institute for Supply Management (ISM) late this morning. It showed a reading of 36.2 that was below forecasts and is the lowest reading since May 1982. That indicates that manufacturer sentiment was weaker than many had thought last month. Since that hints at slower manufacturing activity it is good news for bonds and mortgage rates.

The recent rally in bonds has put us in uncharted waters in terms of their yields. The benchmark 10-Year Treasury Note is currently yielding 2.82%, which is it lo west on record. It broke below 3.00% last week for the first time since the Notes were issued in 1962. While mortgage rates have not recently plummeted as quickly as the yield has, they have fallen quite a ways and show signs of continuing to slide. The downside to that is the possibility of rates spiking higher at any moment. Bond yields and mortgage rates can worsen much quicker than they usually improve. Therefore, we need to remain extremely cautious during this rally as we could see an entire week’s worth of gains erased in a single morning if any of the major influences on bonds turns negative.

The next piece of data that we need to be concerned with comes Wednesday morning with the release of the revised 3rd Quarter Productivity report. This index is expected to show a downward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn’t necessarily bad for the bond market. It is the conditions around economic growth, such as inflation that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 0.9%, down from the previous estimate of 1.1%.

The Fed Beige Book will be posted Wednesday afternoon. This report, which is named after the color of its cover, details economic conditions by region. It is relied on heavily during the FOMC meetings when determining monetary policy, so it results can influence bond trading and mortgage rates if it shows any significant surprises.

Overall, the most important day of the week is Friday with the employment figures being released, but today will also likely be one of the more important. Tomorrow will probably be the lightest day of the week, assuming we don’t see another major sell-off or rally in stocks.

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.