Rate Advisory for March 3, 2011

Thursday’s bond market has opened in negative territory following early stock strength and unfavorable economic news. The stock markets are showing sizable gains with the Dow up 156 points and the Nasdaq up 38 points. The bond market is currently down 17/32, which will likely push this morning’s mortgage rates higher by approximately .250 - .375 of a discount point, partly due to weakness late yesterday.




Revised productivity numbers for the 4th Quarter were posted early this morning. They showed that worker productivity rose at an annual rate of 2.6% last quarter, matching the preliminary estimate that was released last month. Analysts were expecting to see a downward revision to the index, making this a bit of good news for the bond market. Unfortunately, it does not carry enough significance to the markets for it to offset this morning’s bond selling and increases to mortgage pricing.



Helping to fuel this morning’s earl y stock gains and bond selling is last week’s unemployment numbers. Labor Department said early this morning that 368,000 new claims for unemployment benefits were filed last week. This was a noticeable decline from the previous week, particularly because an increase in claims was expected, and was the lowest number of new filings since May 2008. It is worth noting that this was the third decline in the past four weeks. These numbers help support those who feel the labor market is gaining traction and will turn the corner in the near future. Whether or not this is accurate remains to be seen, but since this news comes a day ahead of February’s monthly figures, the bond market is preparing for unfavorable news.



There are two reports scheduled for release tomorrow, with one being much more important to the markets and mortgage rates than the other. The Labor Department will be in the spotlight when they release February's Employment report at 8:30 AM ET. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a large drop in payrolls and little or no increase in earnings. Current forecasts are calling for 0.1% increase in the unemployment rate to 9.1% and approximately 183,000 jobs added during the month. Weaker than expected readings would be great news for the bond market and should lead to lower mortgage rates tomorrow. However, stronger than expected numbers will likely fuel more bond selling and noticeable increases to mortgage rates.



January's Factory Orders will also be released tomorrow, but during late morning hours. It will give us measurement of manufacturing sector strength. This data is similar to last week's Durable Goods, except this report covers orders for both durable and non-durable goods. Current forecasts are calling for an increase in new orders of approximately 2.1%. A smaller than expected rise would be good news for the bond market, but the Employment report carries much more importance than this data.



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.

Rate lock advisory for March 1, 2011

Tuesday’s bond market has opened down slightly following stronger than expected economic news. The stock markets initially looked to be moving higher, but have since fallen into negative ground. The Dow is currently down 61 points while the Nasdaq has fallen 18 points. The bond market is currently down 5/32, which will likely push this morning’s mortgage pricing higher by approximately .250 of a discount point.




This morning’s economic news came from the Institute for Supply Management (ISM), who announced their manufacturing index rose to 61.4 last month. That was higher than the 60.5 that analysts were expecting to see, meaning manufacturer sentiment about business conditions was better than thought. This is negative news for the bond market and mortgage rates because it indicates a strengthening manufacturing sector.



The stock markets turned south after Fed Chairman Bernanke’s prepared statement to the Senate Banking C committee was released. Some of the key points addressed concerns about rising oil prices and its impact on overall inflation and falling home prices, both of which threaten the economic recovery. These concerns are not new, but with the recent spike in oil prices and the Libya issue, that topic is in the forefront of market traders’ minds. Fortunately, the inflation worries haven’t driven bond prices lower this morning, but they also have not improved as the major stock indexes have fallen. Accordingly, we may want to proceed cautiously today despite the stock selling as we may see weakness in bonds later today.



There are no important government reports scheduled for release tomorrow morning, but Mr. Bernanke will repeat today’s testimony to the House Financial Services Committee at 10:00 AM ET. Since the prepared statement is unlikely to show any changes from today’s version, it will probably have little influence on mortgage rates tomorrow. However, the Question and Answer portion of the proceedings could bring a surprise or clarification on the Fed’s thought process on monetary policy. Therefore, we do need to watch his words as they have the potential to affect bond trading and mortgage rates.



There are a couple of private-sector employment-related releases due during early morning hours tomorrow that may influence bond trading since the employment sector is a major concern at the present time. However, I don’t suspect these reports will change mortgage rates unless they show a significant improvement or weakening in the labor market.



The Fed Beige Book will be posted at 2:00 PM ET tomorrow afternoon. This report details economic activity throughout the country by region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trading tomorrow. It probably will not cause a major sell off in the stock or bond m markets, but could cause enough movement in bond prices to possibly improve or worsen mortgage rates slightly if it reveals any significant surprises.



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.

Rate lock advisory for October 13, 2010

Wednesday's bond market has opened in negative territory due to strong stock gains during early trading. The stock markets are reacting favorably to some corporate earnings results that have the Dow up 110 points and the Nasdaq up 26 points. The bond market is currently down 8/32, which should push this morning's mortgage rates higher by approximately .250 of a discount point.




There is no relevant economic data scheduled for release today, but we do have the 10-year Treasury Note auction to watch. Results of the sale will be posted at 1:00 PM ET, meaning it should not impact mortgage rates until afternoon trading. If investor demand for the sale was strong, indicating that investor appetite for longer-term securities is good, we should see bond prices and mortgage rates improve this afternoon. However, a weak interest from investors could lead to selling in bonds and an upward revision to mortgage pricing later today. I suspect that we may get a lukewarm interest in the sale that will prevent much of a bond rally this afternoon, although that is just a theory at this point.



Yesterday afternoon's release of the minutes from the last FOMC meeting did give us a few tidbits of useful information. One was that the Fed was pretty confident that the U.S. economy would not slip back into a recession. Another was growing sentiment that more action may be need by the Fed to keep the economy growing. There were also a couple of previous statements that were reiterated, such as inflation being too low and that unemployment is a significant concern. Overall though, the bond market reacted negatively to the news, closing in negative ground. Some lenders may have revised rate higher as a result, but many were probably waiting for this morning's open to reflect those losses.



Tomorrow has two monthly reports scheduled, but only one is likely to influence mortgage rates. The important release is September's Producer Price Index (PPI) early tomorrow morning. This is one of the two very important inflation readings we get each month. It measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.2% increase in the overall index and a 0.1% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices, giving us a better indication of which direction prices are moving. A larger than expected increase could lead to higher mortgage rates tomorrow, while weaker than expected readings would be favorable for bonds and mortgage pricing.



August's Trade Balance report will also be released early tomorrow morning. It gives us the size of the U.S. trade deficit but is the week's least important report and likely will have little impact on the bond market and mortgage rates. Analysts are expecting to see a $44.5 billion trade deficit, but it will take a wide variance to directly influence mortgage pricing, especially since an important inflation report is also being posted at the same time.



The Labor Department will post last week's unemployment figures tomorrow morning too. They are expected to say that 450,000 new claims for unemployment benefits were filed last week. Since this data tracks only a single week's worth of new claims, it usually does not have an impact on mortgage rates unless it varies greatly from forecasts. But as with the Trade Balance report, the PPI is much more important to the markets and will likely be the force behind any changes to rates.



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.