Archive for April, 2010

Daily Commentary Report for 04/26/10

Posted: April 26, 2010 in Uncategorized

Monday’s bond market has opened in positive territory despite a positive open for stocks. The Dow is starting the week off with a gain of 39 points while the Nasdaq is up 2 points. The bond market is currently up 6/32, which should improve this morning’s mortgage rates by approximately .125 – .250 of a discount point over Friday’s morning rates.

There is no relevant economic news scheduled for release today. If we see any changes to mortgage rates this afternoon, it will likely be the result of a sizable move in stocks. If the stock markets hold near their current levels, mortgage rates should follow suit.

The rest of the week is fairly active with four relevant economic reports in addition to another FOMC meeting and two fairly important Treasury auctions. All of the reports are considered to be at least moderately important while one particularly is considered very important to the markets and mortgage rates. This makes it likely that we will a fair amount of movement in mortgage pricing over the next several days.

The first report comes late tomorrow morning when the Consumer Confidence Index (CCI) for April will be released. This Conference Board index is a key indicator of future spending by consumers. The group surveys 5000 consumers from across the country about their personal financial situations. If sentiment is strong or rising, it is believed that consumers are more apt to make large purchases in the near future. However, if they are concerned about issues such as job security and investments, they will probably delay making large purchases. The latter is better for the bond market and mortgage rates because the expected slowdown in spending would keep inflation concerns to a minimum. But, a sizable increase could hurt the bond market, pushing mortgage rates higher Tuesday. It is expected to show a reading of 53.7, which would be a small increase from March’s 52.5 reading.

This week’s FOMC meeting will begin tomorrow and will adjourn Wednesday afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the 2:15 PM ET post-meeting statement. There appears to be more and more discussion about when the Fed will have to start raising key interest rates to prevent inflation from strengthening. If the statement gives any hint of when that may be, or there is a change in the regular canned portions of the statement, we could see a sizable change to mortgage rates Wednesday afternoon.

Overall, look for plenty of movement in the financial markets and mortgage some days this week, while others will probably be calm. Wednesday will likely be the most important day of the week with the FOMC adjournment, but we may see noticeable changes to rates Friday after the GDP is posted. If this week’s reports reveal weaker than expected economic conditions, the bond market should extend its rally and mortgage rates should fall for the week. However, I recommend taking a cautious approach towards rates if still floating an interest rate and closing in the near future.

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…

Daily Commentary Report for 04/22/10

Posted: April 22, 2010 in 1

Thursday’s bond market has opened in positive territory following early stock weakness. The stock markets are showing sizable losses with the Dow down 70 points and the Nasdaq down 17 points. The bond market is currently up 4/32, which should improve this morning’s mortgage rates by approximately .125 of a discount point.

None of this morning’s economic data can be considered favorable to the bond market or mortgage rates. The big news was March’s Producer Price Index (PPI) that showed a 0.7% increase in the overall index and a 0.1% rise in the more important core data. The 0.7% reading was higher than expected, meaning prices at the producer level of the economy rose more than thought. That raises concerns because the costs usually have to be passed on to the consumer, fueling inflation. However, the core data reading that excludes more volatile food and energy prices matched forecasts, preventing bond selling. Therefore, we can consider this data to be fairly neutral for mortgage rates.

The Labor Department said that new claims for unemployment benefits did fall last week as they were expected to do. The 456,000 new claims were a little higher than what analysts had forecast, but since it was still a sizable drop from the previous week’s total of 480,000 claims this data has not impacted this morning’s mortgage pricing.

The National Association of Realtors said late this morning that home resales rose 6.8% last month, exceeding expectations. This means that the housing sector was stronger than thought, which is negative news for bonds and mortgage rates. It is widely believed that the overall economy will not be able to really strengthen and maintain its recovery if the housing sector has not stabilized. So, we can consider this data negative for bonds also, but it is not considered to be a highly important report. This means it has had little influence on this morning’s mortgage rates also.

March’s Durable Goods Orders will be released early tomorrow morning. It gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products with a life expectancy of at least three years. Current forecasts are calling for an increase in new orders of 0.2%. This would be a sign of slight manufacturing sector growth, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A decline would be considered good news, while a large increase would indicate manufacturing sector strength. Ideally, the mortgage market would like to see a sizable decline in new orders.

Also tomorrow is the release of March’s New Home Sales report. This data is similar to today’s housing release except it covers the remaining 15% of home sales that today’s does not. It is expected to show an increase in sales of newly constructed homes. As with today’s Existing Home Sales report, I don’t see mortgage rates having much of a reaction to its results.

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…

Daily Commentary Report for 04/08/10

Posted: April 8, 2010 in 1

Thursday’s bond market has opened up slightly following news of a spike in unemployment claims and early stock weakness. The stock markets are showing losses with the Dow down 40 points and the Nasdaq down 17 points. The bond market is currently up 2/32, which with yesterday’s late strength should lead to an improvement in this morning’s mortgage rates of approximately .375 – .500 of a discount point over yesterday’s morning rates.

The only factual economic data posted this morning was weekly unemployment figures from the Labor Department. They announced that 460,000 new claims for unemployment benefits were filed last week. This was much higher than the 435,000 that was expected. Because this data only tracks a single week’s worth of new claims, it usually does not impact bond trading enough to affect mortgage rates. However, this morning’s news did have a minor role in this morning’s positive open.

Most of today’s improvements in mortgage pricing actually came as a result of a bond rally late yesterday. Buyers entered the market after the results of the 10-year Treasury Note action were posted yesterday afternoon. The sale went surprisingly well, which helped boost bonds in broader market. The result was downward revisions to mortgage rates late yesterday. Just how much an improvement you should see this morning depends on whether or not your lender revised rates lower yesterday afternoon and if so, by how much. Overall, the improvement should be in the neighborhood of .375 of a discount point when comparing to yesterday’s morning rates.

The 30-year Bond auction is being held today. Even with the interest in yesterday’s 10-year Note sale being strong, I am not expecting similar results in today’s sale. As long as there is a fairly decent demand in today’s auction, I suspect mortgage rates will remain near this morning’s levels. But if the sale goes poorly, we may see some of yesterday’s gains erased, leading to upward revisions to mortgage rates this afternoon. Results of the sale will be posted at 1:00 PM ET.

There is no relevant economic data scheduled for release tomorrow, so look for the stock markets to influence bond trading and mortgage pricing. If stocks move higher, expect bonds to fall and mortgage rates to increase. If stocks continue their weakness into this afternoon and tomorrow morning, we could see further improvements to mortgage rates 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… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now…

Wednesday’s bond market has opened fairly flat as investors cautiously prepare for today’s important auction. The stock markets are showing losses with the Dow down 66 points and the Nasdaq down 5 points. The bond market is currently down 2/32, but we will probably still see an improvement in this morning’s mortgage rates of approximately .125 – .250 of a discount point due to strength late yesterday.

There is no relevant economic data scheduled for release today. Yesterday’s FOMC minutes did shed some light on the Fed’s current thought process about rates and the economy. They indicated that despite recent signs of the economy gaining strength, they have concerns that it may not be able to continue on that pace. Any concerns about the economy being able to expand are considered to be good news for bonds and mortgage rates. However, the minutes also hinted that the Fed may be closer to raising key short-term interest rates than some had thought. The language that the Fed had been using of “an extended period” when referring to how long they expect those rates to remain this low was clarified to mean a change could come sooner than what was previously thought. Overall, the release didn’t hurt the bond market or mortgage rates, but didn’t do much to help them either.

There are two events worth watching today. The first is the 10-year Treasury Note auction, which is the more likely candidate to affect mortgage rates in my opinion. Results of the sale will be posted at 1:00 PM ET. Expectations for the sale are not high. If the investor demand was indeed weak, we may see selling in bonds this afternoon that lead to upward changes in mortgage rates. However, if we are surprised by a decent interest, particularly from international buyers, there is a good possibility of seeing bonds rally and mortgage rates move lower this afternoon.

The second event is a speech by Fed Chairman Bernanke at 1:30 PM ET. He is speaking in Dallas and is expected to touch on the economy. So, it does make our radar as something worth watching out for. If he gives an indication that the economy will have a difficult time recovering at its current pace, we may see bonds react favorably as a result. I suspect that he will not say much that is a surprise, so the likelihood of this event impacting mortgage rates is moderate.

There is no relevant economic data being posted tomorrow except for weekly unemployment figures from the Labor Department. They are expected to report that 435,000 new claims for unemployment benefits were filed last week. This would be a small decline from the previous week, but unless there is a large variance from that total, this data will have minimal influence on mortgage pricing.

There also is the 30-year Bond auction tomorrow. It will be the same pattern as today’s 10-year Note sale with results being posted at 1:00 PM ET. This sale is somewhat relative to mortgage rates, but not nearly important as today’s 10-year Note sale is. We usually see similar results, so if today’s sale goes badly, there is little likelihood of tomorrow’s going exceptionally well.

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…