What the Markets Are Doing Today:
Prices of bonds and mortgage backed securities (MBS) markets both opened up (yields down) this morning while stocks opened down despite stronger than expected economic news.
- The Dow opened down 73 points from yesterday's close
- NASDAQ opened down 7 point from yesterday's close
- The 10 Year Treasury Bond opened up 7/32 from yesterday's close
- FNMA 30 Year 4.5% coupon opened up 1/32 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 up 3/32 from its opening yesterday, and is currently down 1/32 this morning. I expect mortgage rates will remain essentially unchanged from yesterday's close.
Economic Reports Being Released Today:
- Consumer Price Index (CPI) for February -The CPI report showed a 0.4% increase in the overall index in February, is slightly higher than forecasted, and follows a 0.3% increase in January. There was a 0.2% increase in the core data, the same as expected and unchanged from January. The increases are primarily due to rising energy costs. Gasoline jumped 8.3% last month while food prices fell slightly by 0.1%. The CPI measures the change in prices and inflationary pressures at the consumer level, and is the most widely followed indicator of inflation. Stronger than expected readings is usually bad news for bonds and mortgage backed securities (which means prices fall and yields and mortgage rates rise). However, the report had no effect on bonds or mortgage backed securities as traders await the FOMC announcement this afternoon.
Important News of the Day:
The Federal Open Market Committee (FOMC) will close their meeting at 2 PM ET this afternoon and issue a press release at 2:15 PM ET. The key short term rate is at a range of 0% - .25% and likely will remain there for some time. The Federal Reserve should be more focused (hopefully) on economic recovery, the Treasury Debt purchase program as well as the Term Asset-Backed Securities Loan Facility (TALF) to unfreeze the credit markets.
In a letter written to Congress yesterday, Treasury Secretary Timothy Geithner wrote that $165 million will be withheld from the $30 billion that AIG is due to receive as part the bail-out package. "We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company the amount of the retention awards just paid," Mr Geithner's wrote in his letter. "In addition, we will deduct from the $30 billion in assistance an amount equal to the amount of those payments."
Andrew Cuomo, Attorney General of NY, revealed yesterday that 73 AIG executives were each awarded bonuses worth more than $1 million.
Meanwhile, Edward Liddy, CEO of AIG, will be testifying before Congress today.
The Mortgage Bankers Association reported that refinance mortgage applications were up more than 29% last week following the announcement of the Obama Administration's plan to save housing and lower mortgage rates.
There are several important economic reports that will be released this week - including the Producer Price Index and the Consumer Price Index, and another Federal Open Market Committee (FOMC) meeting today and tomorrow. 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:
Light Volatility in AM. Moderate Volatility in PM. Overall, I'm not expecting to see too much movement in the markets this morning while the FOMC meets. The important factor will be the statement released by the FOMC at 2:15 PM ET today - much will depend on what they say about current economic conditions, the outlook on inflation, and what their plans are to stimulate the economy moving forward.
There's 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.
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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