What's Driving Mortgage Rates This Week? Dana Bain Premiere Mortgage

By
Mortgage and Lending with Premiere Mortgage Services Inc. MLO 18693

http://www.bainmortgage.com/MortgageMarketWeekInReview

Newsletter-November 11th, 2013    
Provided by 
Dana Bain & Robin Dunbar Bain
Dana Bain
Premiere Mortgage Services
11 Malvern Hill Road
Sterling, MA 01564
Phone: (978) 422-2311
Fax: (978) 422-2313
E-Mail: dana@bainmortgage.com
 
 

Market Comment

Mortgage bond prices finished the week lower, which pushed mortgage interest rates sharply higher.  Rates were relatively steady throughout most of the week trading within a narrow range.  Unfortunately the employment report was stronger than expected and rates skyrocketed Friday morning.

 

The unemployment rate in October stood at 7.3% and the economy added 204,000 jobs. Traders expected the unemployment rate at 7.3% and the creation of 110,000 jobs. Mortgage interest rates finished the week worse by approximately 7/8 of a discount point.

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

Veterans Day Monday, Nov. 11   Important.  No trading Monday.  Market may be volatile when trading resumes Tuesday morning.
3-year Treasury Note Auction

Tuesday, Nov. 12,
1:15 pm, et

None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction

Wednesday, Nov. 13,
1:15 pm, et

None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims

Thursday, Nov. 14,
8:30 am, et

332k Important.  An indication of employment.   Higher claims may result in lower rates.
Trade Data

Thursday, Nov. 14,
8:30 am, et

$39b deficit Important.  Affects the value of the dollar.  A falling deficit may strengthen the dollar and lead to lower rates.
30-year Treasury Bond Auction

Thursday, Nov. 14,
1:15 pm, et

None Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Industrial Production

Friday, Nov. 15,
9:15 am, et

Up 0.4% Important.  A measure of manufacturing sector strength.  A lower than expected increase may lead to lower rates.
Capacity Utilization

Friday, Nov. 15,
9:15 am, et

78.2% Important.  A figure above 85% is viewed as inflationary.  Weaker figure may lead to lower rates.

GSE's

Government sponsored enterprises (GSEs) are financial services created by Congress.  Two of the most important GSEs in the mortgage industry are Fannie Mae and Freddie Mac.  These corporations are designed to make credit available to targeted borrowers in an efficient manner.  Fannie and Freddie were privately owned until September 2008 when the lines were blurred.  The credit crisis resulted in Fannie and Freddie facing huge liquidity concerns.  Their insolvency under fair value accounting sparked worries about their failure.  The Treasury and Congress worked to avert a catastrophe.  The Treasury ultimately placed the entities in “conservatorship.”  This enabled the Treasury to increase lines of credit to the GSEs and bought equity in the companies.  This US Government “ownership” of these companies left many unknowns and clouded the future. 

The supply and demand characteristics of Treasury bonds and mortgage-backed securities (MBSs) issued by Fannie and Freddie differ significantly.  Treasury securities represent money needed to fund the operations of the US government.  MBSs, on the other hand, represent borrowing by homeowners.  Because homeowners can sell or refinance their homes, investors in 30-year mortgage-backed securities usually see principal repayment in significantly shorter periods of time.  In terms of demand, Treasury securities are regarded as “risk free” investments, and often benefit from a “flight to quality” in times of financial crisis.  MBSs are part of many retirement accounts, which citizens depend on for income.  Some want to see the GSEs completely dissolved and a new system put in place.  The ramifications of that could be widespread and the debate continues.




 
 
 
   MORTGAGE MARKET IN REVIEW Newsletter-November 11th, 2013    

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