What the Mortgage Backed Securities Market is Doing Today:
The FNMA 30-Year 4.5% MBS opened down 4/32 this morning to 99.80 ahead of the unemployment and employment situation reports.
The price of the FNMA 30-Year 4.5% coupon closed up 5/32 yesterday to 99.92 (as shown by the white line). The MBS was down as much as 4/32 this morning before reversing course on a worse than expected employment situation report. MBS is currently trading up 3/32 to 100.02 (as shown by the blue line). Remember, on mortgage backed securities (MBSs), as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will be the same if not 0.125% better in price this morning as compared to yesterday.
Economic Reports Released Today:
- The Employment Situation Report for June - Prices of bonds and mortgage backed securities rose (yields and mortgage rates fell) on the news of a larger than expected decline in payrolls, the rising unemployment rates, and no change in hourly earnings. Businesses slashed 470,000 jobs last month, and is much higher than expected. Analysts were expecting to see that 350,000 jobs were lost. This follows a loss of 322,000 jobs in May and a loss of another 519,000 jobs in April. A total of 6.5 million jobs have been lost since December 2007. The average hourly wage remains unchanged - analysts were expecting to see a 0.2% increase. And, the unemployment rate rose just 0.1% to 9.5%, the highest since August 1983. Analysts are expecting the unemployment rate to continue climbing for the remainder of the year and early into next year, and may reach as high as 11.0%.
- Jobless Claims - There were 614,000 new claims filed for unemployment last week, down 16,000 from the previous week, and is less than estimated. Analysts predicted that there would be 619,000 new claims. Continuing claims for unemployment is down 53,000 from the previous week to 6.702 million. This still indicates that it's taking more time for the jobless to find work, and some are either finding work or have exhausted their unemployment benefits. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
- Factory Orders for May - The report revealed a 1.2% rise in new factory orders last month, and is up from the 0.7% increase in April. Analysts were expecting the report to show a 1.4% rise from April's levels. Released by the Commerce Department, this report is similar to the Durable Goods Orders report that was released last week. The biggest difference is that this week's report covers both durable and non-durable goods. While it usually doesn't have as much of an impact on the bond market as the durable goods data does, a smaller than expected rise in orders is be considered good news for the bond market and could help lower mortgage rates slightly.
Important News of the Day:
The results of this week's purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $598 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.
Fannie Mae and Freddie Mac both announced plans to allow homeowners to refinance up to 125% of the value of their homes. Homeowners with Freddie Mac loans can take advantage of the program now provided they refinance through their loan servicers. If a homeowner with a Freddie Mac loan wishes to refinance with a lender other than their loan servicer, they must wait until October 1. Click here for more information about Freddie Mac's program. Those with Fannie Mae loans must refinance through their loan servicers, but must wait until September 1 to take advantage of the program. Click here for more information about Fannie Mae's program.
There are five economic reports scheduled for release this holiday shortened week, but four of them are considered only fairly important. And of those four reports, the employment situation report, released this morning, is considered the most important. The markets are closed on Friday. Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch at www.LewCorcoran.com/MyBlog.
What's Happening With Mortgage Rates Today:
High Volatility. Overall, we can expect to see some volatility in the markets and in mortgage rates today. The reasons are: 1) the report on the rate of unemployment; and 2) trading in afternoon will probably be light as traders leave early for the long weekend. I recommend that you maintain contact with your mortgage professional this week if you're still floating an interest rate and are getting close to settlement.
In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Locking is making more sense in the short term right now as the markets position themselves for the next wave of government debt auctions next week. The ever increasing massive government debt and fears of inflationary pressures could soon drive mortgage rates up again. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in. Otherwise keep an eye on the markets and maintain contact with your mortgage professional. The markets can change at any moment.
My Interest Rate Lock Advice for Today:
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 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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