Tuesday's bond market has opened well in negative territory following sharp gains in the stock markets. Stocks are doing very well this morning following an unusual move by the Fed to add liquidity to the markets. The results are stock rally and bond selling. The Dow is currently up over 200 points while the Nasdaq has gained 35 points. The bond market is currently down 28/32, but we will still see an improvement in this morning's mortgage rates as a result of strength late yesterday and optimism in the Mortgage Backed Securities (MBS) market.
The only piece of economic news released today was January's Goods and Services Trade Balance. It showed the U.S. trade deficit at $58.2 billion. This was smaller than expected, but since the data is not considered to be of high importance, it had little influence on trading and mortgage rates.
The big news of the day was an announcement from the Fed that they were pumping $200 billion in liquidity to t he markets. The short-term sale that they are doing this via was not the surprise. What is unusual about this sale is that the banks can use AAA rated mortgage securities as collateral. Usually, only securities backed directly by Fannie Mae and Freddie Mac are allowed as collateral. This will allow banks to pledge more collateral and therefore, borrow more from the Fed. This is believed to mean that banks will have more funds to loan to individuals and corporate customers. That should increase economy activity, at least by theory.
The rest of the week brings us the release of three more economic releases for the bond and mortgage markets to digest along with a 10-year Treasury Note auction. None of the important economic news is scheduled for release until Thursday. Two of them are considered to be of high importance to the markets. This means that we will likely see the most movement in rates the latter part of the week.
Thursday morning brings us the release of February's Retail Sales data. 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 an increase in sales of approximately 0.2%. If we see a decline in sales, the bond market should rise and mortgage rates will likely fall. If it reveals a larger 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.
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