Our Real Estate Blog

Mortgage Rates (12/1/2010)

December 2nd, 2010 12:17 AM by Lehel S.

Wednesday’s bond market has opened down sharply following an early surge in stock prices. Stocks are reacting well to a couple of factors including good news about China’s economy and favorable data here. The Dow is currently up 189 points while the Nasdaq has gained 50 points. The bond market is currently down 31/32, which will likely push this morning’s mortgage rates higher by approximately .375 - .500 of a discount point.

The Labor Department reported early this morning that 3rd quarter worker productivity rose at an annual rate of 2.3%, up from the preliminary estimate of 1.9%. This was slightly lower than forecasts of 2.4% and has not had much of an impact on today’s trading or mortgage pricing.

November’s manufacturing index from the Institute for Supply Management (ISM) was the important data of the morning. It showed a reading of 56.6 that was a little higher than forecasts. This was a decline from Octobe r’s reading, but was the 16th consecutive month above 50.0 that indicates manufacturing sector growth. The difference between forecasts and the actual reading is not enough to cause stocks and bonds to move this much. I believe that the stock rally has pulled funds away from bonds more than today’s data has caused concerns about economic growth. The good news is that if this is the case, today’s sell-off on bonds could be an overreaction and only temporary.

The Federal Reserve will release their Beige Book at 2:00 PM ET today. This report, which is named simply after the color of its cover, details economic conditions by region. That information is relied on heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any significant surprises. More times than not though, this report does not cause afternoon revisions to mortgage rates. There is no particular reason to believe this release will be any different, however, there is the possibility of it doing so. 

Tomorrow’s only semi-relevant data is the weekly unemployment numbers from the Labor Department. They are expected to announce that new claims for unemployment benefits rose to 422,000 last week. This data usually does not have a much of an impact on the markets or mortgage rates unless it shows a significant variance from forecasts. Last week’s release of the previous week’s numbers did just that. The unexpected drop of 34,000 new claims pointed towards employment sector strength and helped bond prices to drop sharply ahead of the Thanksgiving holiday. If we see another surprise decline or a large increase in new claims, this data may influence mortgage rates tomorrow, especially since it is the day’s only data. The higher the number of new claims, the better the news for bonds and mortgage pricing.

Friday brings us the almig hty monthly Employment report. It is arguably the single most important report we see each month, to it has the potential to cause plenty of volatility in the markets. With no monthly or quarterly data scheduled for release tomorrow, we may see bond traders take a defensive approach during trading tomorrow. This could lead to a little pressure in bonds, probably during afternoon hours. However, if Friday’s report gives is much weaker than expected results, we should see the bond market rebound after it is released. That could easily erase this morning’s increase to mortgage rates.

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. 
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Posted by Lehel S. on December 2nd, 2010 12:17 AM

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