Our Real Estate Blog

Mortgage Rates (11/15/2010)

November 15th, 2010 9:09 AM by Lehel S.

Monday’s bond market has opened in negative territory following much stronger than expected economic news and early stock gains. The stock markets are reacting favorably to this morning’s data, pushing the Dow up 44 points and the Nasdaq up 3 points. The bond market is currently down 16/32, which should push this morning’s mortgage rates higher by approximately .500 of a discount point than Friday’s morning rates. A good portion of this morning’s rate increase is a result of weakness late in bonds late Friday.

The Commerce Department posted October’s Retail Sales data early this morning, showing a surprising 1.2% increase in retail level sales. This was much stronger than the 0.7% increase that was expected, indicating consumers were much more active last month than many had thought. This is considered bad news for the bond market and mortgage rates because consumer spending fuels economic growth that makes bonds less a ppealing to investors.

A secondary reading in today’s report that excludes more volatile auto-related sales showed a 0.4% increase. This matched analysts’ forecasts, but the headline number of a 1.2% jump is having the biggest influence on bond trading and mortgage rates. The negative tone in bonds late last week is also extending into this morning’s trading. It appears that we will need some extremely favorable data to put an end to the recent selling in bonds.

There are two reports scheduled to be posted tomorrow. The first is October's Producer Price Index (PPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The PPI measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If it reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and should drive mortgage rates higher. If we see in-line or weaker than expected numbers, mortgage rates should fall tomorrow. Current forecasts are calling for an increase of 0.8% in the overall reading and a 0.1% increase in the core reading.

Tomorrow’s second report is October's Industrial Production data. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.3% increase in production. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the PPI readings are. A significant surprise in the PPI would likely make this data a non-factor in tomorrow’s mortgage pricing.

If I were considering financing/refinancing a home, I woul d.... Lock if my closing was taking place within 7 days... Lock 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 15th, 2010 9:09 AM

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