Our Real Estate Blog

Mortgage Rates (12/8/2010)

December 10th, 2010 8:45 AM by Lehel S.

Wednesday’s bond market has opened in negative territory again as the madness continues. I am starting to think that this selling spree may be in part due to a foreign investor, possibly China or another country cutting back on their holdings of U.S. securities. It is just speculation at this point, but it does give reason for the huge spike in bond yields. If this is the case, the bad news would be that we don’t know how much more will be sold and that it could lead to others following suit. The good news would be that it could be a temporary spike and as long as other sellers don’t line up after, we should see some sizable improvements soon. However, the main question is from how high would we improve?

The stock markets are relatively calm this morning with the Dow down 14 points and the Nasdaq up 3 points. The bond market is currently down 34/32, pushing its yield up to 3.26%. This will likely translate into an increase of approximat ely .875 ? 1.000 of a discount point in this morning’s mortgage rates compared to yesterday’s morning pricing.


There is no relevant economic data being posted today, but we do have the 10-year Treasury Note auction taking place. This is the first and more important of the two auctions this week that have the potential to influence mortgage rates. Results of the sale will be posted at 1:00 PM ET, so any market reaction will come during afternoon hours. If there was a strong demand from investors during the auction, we could see bond prices improve this afternoon and mortgage rates revise lower. However, a lackluster interest could lead to upward changes to rates later today. The recent bond selling makes it difficult to be too optimistic about this sale, so please be careful if closing soon and still floating an interest rate.

There is also no relevant data scheduled for tomorrow either. The Treasury will sell 30-year Bonds tomorrow, but today’s 10-year Notes are tied closer to mortgage bonds and likely will have a bigger impact on mortgage pricing. This leaves the stock markets to again take center stage tomorrow. If the major stock indexes extend their recent gains, we may see another increase to rates. However, losses in stocks should help improve mortgage pricing.

There is little to be optimistic about regarding these auctions. The recent negativity in the bond market and a weak 3-year Note auction yesterday (source of confusion/correction in our report) don’t give us much to look forward to. I still strongly believe that the recent run in stocks and sell-off in bonds is completely uncalled for and we will at sometime in the near future see rates well below today’s pricing. That said though, the yield on the benchmark 10-year Note is now well above the 3.00% threshold that was previously looked at as an importa nt benchmark. This puts into question whether 3.00% is a level of support (meaning much more room for rates to move higher) or whether its still a resistance point or ceiling. The latter would mean we could expect it to fall below very soon, improving mortgage rates also. Keep in mind that bond prices and yields move in opposite directions and mortgage rates follow yields. Therefore, bond gains equate into lower yields and better mortgage pricing for borrowers.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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 10th, 2010 8:45 AM



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