Our Real Estate Blog

Mortgage Rates (12/6/2010)

December 6th, 2010 9:25 PM by Lehel S.

Monday’s bond market has opened in positive territory following a flat open in stocks and a primetime TV reminder from Fed Chairman Bernanke that the economic outlook isn’t so rosy. The stock markets are nearly unchanged from Friday’s close with the Dow down 3 points and the Nasdaq down 1 point, but just the lack of a gain is good news for the bond market at this point. The bond market is currently up 15/32, which should improve this morning’s mortgage rates by approximately .125 - .250 of a discount over Friday’s morning pricing. 

There is no relevant economic news being posted today. Fed Chairman Bernanke’s interview on last night’s edition of 60 Minutes has helped push bonds more towards reality. During his interview that aired last night, he said that unemployment would likely remain high for 4 or 5 years and that recent concerns about inflation are overstated. He also added that another round of debt purchases by the Fed is possible. I find the timing of this interview to be impeccable and quite ironic after last week’s activity. It, along with Friday’s employment data, will hopefully help restore some reason to the markets and remind us that the economy still has plenty to overcome.

The rest of the week doesn’t bring us too much to be concerned with. There are only two monthly or quarterly reports on the agenda in addition to two Treasury auctions the middle part of the week. This means that the stock markets will likely be the focal point multiple days this week, including today.

There are Treasury auctions scheduled for several days this week, but the two important ones are the 10-year Note sale Wednesday and the 30-year Bond sale Thursday. Wednesday’s auction is the more important of the two events and will likely influence mortgage rates more. Results of each sale will be posted at 1:00 PM ET. If they were met with a strong d emand from investors, particularly international buyers, we should see afternoon strength in bonds and improvements to mortgage pricing those days. It will be interesting to see just how much of an interest these sales bring. The most recent ones have not gone very well and after last week’s bond selling, it appears general interest in bonds is not high at the moment. However, the recent spike in bond yields could help draw additional buyers.

Friday morning has the week’s only relevant monthly economic data, but neither of the reports are considered to be highly important. After last week’s nightmare for mortgage rates, some may think the lack of important data could be good news this week. I am not so sure though since last week’s high profile data didn’t really give us results that pointed towards an economic recovery anytime soon. If the data was much stronger than expected, the break would be welcomed this week. I think the h urdle could be the fact there is nothing on tap to contradict last week’s rally that was based much more on speculation than factual data. If the stock markets can extend last week’s gains, we may see further increases to mortgage rates. But stock weakness should benefit the bond market and mortgage rates.

Overall, I don’t believe we will see nearly as much volatility in the markets and mortgage pricing as we saw last week. Unfortunately, this means that there is little chance of recovering all of last week’s spike in mortgage rates, but last night’s interview with Mr. Bernanke certainly won’t hurt us. If the stock markets give back some of last week’s rally, we should see mortgage rates close the week lower than today’s opening levels. I recommend maintaining contact with your mortgage professional, at least until the markets stabilize.

If I were considering financing/refinancing a home, I would.... Float 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. 
Posted in:General
Posted by Lehel S. on December 6th, 2010 9:25 PM

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