Our Real Estate Blog

Mortgage Rates (10/13/2010)

October 13th, 2010 5:15 PM by Lehel S.

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 dir ectly 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 financ ing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers. 
Posted in:General
Posted by Lehel S. on October 13th, 2010 5:15 PM



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