What the Markets Are Doing Today:
The bond and Mortgage Backed Securities opened in slightly positive territory while the stock markets opened in negative territory again this morning following news of a much weaker than expected economy during the 1st quarter of the year.
- The Dow opened down 71 points from yesterday's close
- NASDAQ opened down 23 points from yesterday's close
- The 10 Year Treasury Bond opened up 14/32 from yesterday's close
- FNMA 30 Year 4.0% coupon opened up 3/32 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 9/32 from its opening yesterday and is currently flat against yesterday's close. I expect that today's mortgage rates will worsen by 0.125 - 0.25 in discount points today.
Economic Reports Being Released Today:
- 1st Quarter Gross Domestic Product (GDP) - Today's release of the GDP revealed that activity fell at an annual rate of 6.1% during the first three months of the year. This is much weaker than the 5.0% decline that was expected, and shows that the economy is continuing to slow down. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best indicator of economic growth or contraction. This is considered good news for bonds and mortgage rates (higher prices and lower yields) because slowing economic activity eases the concerns for inflation.
- Federal Open Market Committee Meeting (FOCM) - The FOCM will adjourn with a press release at 2:15 pm this afternoon. As it's expected that the current fed funds rate at 0 to 0.25% will remain unchanged, bond traders instead will be focusing on the statement itself. Bond traders will be looking for the Fed's view of our current and future economic conditions as well as any hints as to how the Fed may respond to them in the near future.
Important News of the Day:
The Federal Open Market Committee (FOMC) meeting that began yesterday will adjourn early this afternoon. Analysts do not expect any change in the key short-term interest rates. However, we may see some volatility in the markets following the post-meeting press release at 2:15 PM ET.
This week will be very active in terms of economic releases scheduled for release for the remaining days of the week - including another FOMC meeting. 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. Look for plenty of movement in the financial markets and mortgage rates this week. Wednesday will likely be the most important day of the week with the release of the Gross Domestic Product (GDP) report as well as the adjournment of the Federal Open Market Committee (FOMC) meeting. We may also see noticeable changes in mortgage rates tomorrow and Friday. If the reports being released this week reveal weaker than expected economic conditions, the bond markets may rally and mortgage rates could fall.
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. See today's mortgage rates at www.LewCorcoran.com/RateSheet.
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