What the Markets Are Doing Today:
Prices of bonds and mortgage backed securities opened down (yields up) again this morning while stocks opened up on stronger than expected economic data.
- The Dow opened up 87 points from yesterday's close
- NASDAQ opened up 19 points from yesterday's close
- The 10 Year Treasury Bond opened down 10/32 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 down 2/32 from its opening on yesterday, but is currently down 3/32 this morning. I expect mortgage rates will be about the same in pricing as yesterday's rates.
Economic Reports Being Released Today:
- Durable Goods Orders for February - New orders for big-ticket items rose 3.4% in February - much more than the 2.0% decline that economists predicted - and is the first increase in 7 months. This indicates that the demand for durable goods was much stronger than originally thought. Overall, today's durables report was a pleasant shock. And, more economic indicators are starting to fall into the "improved" or "no longer falling" categories. However, this data can be quite volatile from month to month and cannot be relied upon as a strong indication that manufacturing activity is rebounding on a broad scale.
- New Home Sales Report - New home sales came in at a better than expected rate 337,000 million units on an annualized basis, more than 315,000 units analysts were expecting. And, this is a 4.7% gain over the previous month. However, while it's encouraging news for the housing sector, this data is not considered to be of high importance to the markets or to mortgage rates.
Important News of the Day:
The Feds will begin purchasing Treasury notes today - approximately $7.5 billion - which led to a drop in MBS prices (and an increase in yields) this morning. Hopefully this won't last and MBS prices should improve as the Feds are also purchasing MBSs.
There are economic reports scheduled for release in each of the remaining days this week, but none are considered to be of extreme importance. Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch.
What Happening With Mortgage Rates Today:
Moderate Volatility. Trader's are currently taking profits after last week's rally in the bond markets and yesterday's rally in the stock markets. Traders are also taking the opportunity to reposition their portfolios and prepare for the economic data that is scheduled for release over the next few weeks.
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.
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