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Mortgage Rates (11/1/2010)

November 1st, 2010 2:23 PM by Lehel S.

Monday’s bond market has opened in negative territory following mixed results from this morning’s economic data and early strength in stocks. The stock markets have given back some of their earlier gains, but remain in positive ground. The Dow is currently up 48 points while the Nasdaq has gained 3 points. The bond market is currently down 9/32, which will likely push this morning’s mortgage rates higher by .125 - .250 of a discount point.

There were two reports released this morning that are relevant to mortgage rates. The first was September’s Personal Income and Outlays early this morning. It showed that income fell 0.1% and that spending rose 0.2%. Both of these readings were below forecasts of 0.3% and 0.4% increases respectively. This means that consumers had less money to spend last month and spent less than thought. This is good news for the bond market and mortgage rates because consumer spending makes up two-thirds of t he U.S. economy. 

The second release of the day was the Institute for Supply Management’s (ISM) manufacturing index late this morning. It was the bad news, revealing a reading of 56.9 that exceeded forecasts. That means that more manufacturers felt business improved last month than did in September, indicating manufacturing sector strength. Since this data is looked upon as one of the more important monthly reports, it has negatively impacted the bond market and mortgage rates this morning.

The rest of the week has three more relevant economic reports scheduled, one of which is extremely important to the markets and mortgage pricing. There is no relevant data scheduled for release tomorrow, so look for the stock markets to influence bond trading and mortgage rates. Sizable stock gains could lead to bond selling and slightly higher mortgage rates tomorrow. However, stock selling could lead to a downward revision in mortgage rates.

This week’s FOMC meeting is a two-day meeting that begins tomorrow and adjourns Wednesday afternoon. There is no possibility of the Fed changing key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of when the Fed may make a move, particularly to help boost economic activity. The meeting will adjourn at 2:15 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours. Generally speaking, any hint that they may need to make a rate increase relatively soon would be negative news for bonds and lead to higher mortgage rates. The markets will actually be looking for news of another round of debt purchases by the Fed. If they do announce a sizable purchase program of government or mortgage debt Wednesday, we could see the bond market rally and mortgage rates move noticeably lower.

Overall, the single most important day will likely be Friday due to the im portance of the monthly Employment report. In addition to the economic reports and the FOMC meeting, I believe stocks will continue to experience volatility that will also impact bond trading. The key to the week will be Friday’s employment numbers or the FOMC statement, but any significant swings in the stock markets may also influence whether mortgage rates close the week higher or lower than tomorrow morning’s levels.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float 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. 
Posted in:General
Posted by Lehel S. on November 1st, 2010 2:23 PM

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