November 9th, 2009 10:12 AM by Lehel S.
Monday's bond market has opened up slightly despite early stock gains. The stock markets are rallying this morning, pushing the Dow to a one year high. It is currently showing a gain of 140 points while the Nasdaq is up 50 points. The bond market is currently up 3/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.
There is no relevant economic data scheduled for release today. In fact, there is no relevant data scheduled until Friday morning. 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.
The stock markets will likely be a significant influence on bond trading and mortgage rates this week in addition to the two particular Treasury auctions. If the stock markets rally, we will probably see fund s 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 tomorrow 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.
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 tomorrow's Treasury auction. If they give us favorable results, mortgage rates will likely close the week lower than this morning'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 opinio n 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.