Rate Watch for February 10, 2010

Wednesday's bond market has opened relatively flat as investors prepare for today's important 10-year Note auction. The stock markets are showing losses with the Dow down 72 points and the Nasdaq down 15 points. The bond market is currently up 2/32, but we will likely still see this morning's mortgage rates move higher by approximately .125 - .250 of a discount point due to weakness late yesterday.

Today's only semi-relevant economic data was December's Goods and Services Trade Balance. It revealed a $40.2 billion trade deficit that was much larger than expected. This data does not usually heavily influence mortgage rates, but can hurt or boost the U.S. dollar against other currencies that can make our securities more or less attractive to international investors. But today's data has not affected this morning's mortgage rates.

I suspect that today's 10-year Treasury Note auction will cause some afternoon revisions to mortgage rates today. I w ould be surprised if there was an overwhelmingly strong demand for the Notes, and as a result we could see afternoon weakness in bonds. This morning's flat open is not much concern as it is normal to see weakness ahead of the sales as participants prepare for them. But that any losses are usually recovered after if the sale goes well. Results will be posted at 1:00 PM ET, so any reaction would be during afternoon hours.

There is no important economic data scheduled for release tomorrow. We do get weekly unemployment figures from the Labor Department and there is a 30-year Bond auction for the market to digest. The Labor Department will post last week's unemployment number early tomorrow morning. They are expected to show that 465,000 new claims for benefits were filed last week, down from 480,000 the previous week. Because this tracks only a single week's worth of claims, it usually does not cause much movement in mortgage rates unless it varies greatly fro m forecasts.

The 30-year Bond auction is fairly relevant to the mortgage market, but today's 10-year Note sale will likely have a more direct impact on mortgage rates. Depending on today's sale goes, tomorrow's results could be a non-factor in the mortgage market. As with today's sale, results will be posted at 1:00 PM ET, so any reaction will be during afternoon trading.

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... Lock 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.