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Mortgage Rates (11/9/2009)

November 9th, 2009 8:36 AM by Lehel S.

This week brings us the release of only two relevant economic reports but neither of them is considered to be highly important. There are two important Treasury auctions this week that may influence mortgage rates more than the minor economic data that is scheduled. It is also a holiday-shortened week with the bond market closed Wednesday in observance of the Veterans Day holiday.

Both of this week's monthly economic reports will be posted Friday morning. This means that the stock markets will likely be a significant influence on bond trading and mortgage rates in addition to the two particular Treasury auctions. If the stock markets rally, we will probably see funds shift from bonds into stocks that potentially offer better returns. The Dow closed above 10,000 last week, but not by much. Therefore, if stocks fall from current levels early in the week, concerns about them being able to move much higher in the near future could lead to significant selling. That would make bonds more attractive to investors and lead to lower mortgage rates.

The two important Treasury auctions come Tuesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important one as it will give us an indication for demand of mortgage-related securities. They are usually sold on back-to-back days, but the Wednesday holiday pushes the first sale back to Tuesday. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would result in upward revisions to mortgage rates.

The first monthly data of the week is September's Goods and Services Trade Balance report early Friday morning. It helps us measure the siz e of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities' proceeds are worth more when sold and converted to the investor's domestic currency. However, its results will not likely directly lead to changes in mortgage rates.

Friday's second report is November's preliminary reading of the University of Michigan's Index of Consumer Sentiment. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 71.4, up from October's final reading of 70.6. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer s pending makes up two-thirds of the U.S. economy, any related data is watched closely.

Overall, it is difficult to predict just how active this week will be for mortgage rates. As expected, last week brought us quite a bit of volatility in rates. This week could be very calm or could be just as active as last week was. I don't believe the economic data on tap will be a catalyst. I think the key will be the stock markets and Tuesday's Treasury auction. If they give us favorable results, mortgage rates will likely close the week lower than tomorrow's opening 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 opini on and cannot be guaranteed to be in the best interest of all/any other borrowe

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Posted by Lehel S. on November 9th, 2009 8:36 AM

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