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Mortgage Rates (12/28/2010)

December 28th, 2010 12:37 PM by Lehel S.

Monday’s bond market has opened slightly in negative territory despite early stock weakness. The stock markets are kicking the last week of the year off with a 32 point loss in the Dow and the Nasdaq down 12 points. The bond market is currently down 5/32, which may push this morning’s mortgage rates higher by approximately .125 - .250 of a discount point over Thursday’s morning pricing.

There is no relevant economic data being posted today. The rest of the week brings us the release of only one piece of monthly economic data that is considered important to mortgage rates, in addition to two relatively important Treasury auctions. It is somewhat of another holiday-shortened week with the bond market closing early Friday in recognition of the New Years Day holiday. However, many traders will not be working Friday, so we can expect to see a very light day of trading.

Tomorrow has the week’s only important data when the Confe rence Board posts their Consumer Confidence Index (CCI) for this month. This is a pretty important release because it measures consumer willingness to spend. If consumers are more confident in their personal financial situations, they are more apt to make large purchases. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely by market participants and can have a significant influence on mortgage rate direction. Current forecasts are calling for an increase in confidence from November’s reading of 54.1. Analysts are expecting tomorrow’s release to show a reading of 56.1. The lower the reading, the better the news for bonds and mortgage pricing.

This week also has Treasury auctions scheduled today, tomorrow and Wednesday. The two that are most likely to influence mortgage rates are tomorrow’s 5-year and Wednesday’s 7-year Note sales. If those sales are met with a strong demand, particularly Wedn esday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor demand may create bond selling and upward revisions to mortgage rates.

The bond market will close at 2:00 PM ET Friday and will reopen next Monday for regular hours. The stock markets will not be recognizing the holiday with regular trading hours both Friday and Monday. Therefore, it is possible to see late afternoon changes to rates Friday if the stock markets make a big move upward or downward. Although I suspect we will see a fairly quiet afternoon as bond market participants and many stock traders head home early for the holiday.

Overall, tomorrow will be the most important day of the week, but we may see some volatility any day. The thin trading that we will probably see the latter part of the week often creates larger than usua l fluctuations in the major indexes. Despite last week’s shortened schedule, we saw plenty of movement in mortgage rates. This week likely will be the same as investors look to make year-end adjustments to their portfolios. Accordingly, I recommend keeping in contact with your mortgage professional if still floating an interest rate and closing in the immediate future.

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 28th, 2010 12:37 PM

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