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Mortgage Rates (2/28/2011)

March 2nd, 2011 7:16 AM by Lehel S.

Tuesday’s bond market has opened down slightly following stronger than expected economic news. The stock markets initially looked to be moving higher, but have since fallen into negative ground. The Dow is currently down 61 points while the Nasdaq has fallen 18 points. The bond market is currently down 5/32, which will likely push this morning’s mortgage pricing higher by approximately .250 of a discount point.

This morning’s economic news came from the Institute for Supply Management (ISM), who announced their manufacturing index rose to 61.4 last month. That was higher than the 60.5 that analysts were expecting to see, meaning manufacturer sentiment about business conditions was better than thought. This is negative news for the bond market and mortgage rates because it indicates a strengthening manufacturing sector. 

The stock markets turned south after Fed Chairman Bernanke’s prepared statement to the Senate Banking C ommittee was released. Some of the key points addressed concerns about rising oil prices and its impact on overall inflation and falling home prices, both of which threaten the economic recovery. These concerns are not new, but with the recent spike in oil prices and the Libya issue, that topic is in the forefront of market traders’ minds. Fortunately, the inflation worries haven’t driven bond prices lower this morning, but they also have not improved as the major stock indexes have fallen. Accordingly, we may want to proceed cautiously today despite the stock selling as we may see weakness in bonds later today.

There are no important government reports scheduled for release tomorrow morning, but Mr. Bernanke will repeat today’s testimony to the House Financial Services Committee at 10:00 AM ET. Since the prepared statement is unlikely to show any changes from today’s version, it will probably have little influence on mortgage rates tom orrow. However, the Question and Answer portion of the proceedings could bring a surprise or clarification on the Fed’s thought process on monetary policy. Therefore, we do need to watch his words as they have the potential to affect bond trading and mortgage rates.

There are a couple of private-sector employment-related releases due during early morning hours tomorrow that may influence bond trading since the employment sector is a major concern at the present time. However, I don’t suspect these reports will change mortgage rates unless they show a significant improvement or weakening in the labor market.

The Fed Beige Book will be posted at 2:00 PM ET tomorrow afternoon. This report details economic activity throughout the country by region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trading tomorrow. It probably will not cause a major sell off in the stock or bond m arkets, but could cause enough movement in bond prices to possibly improve or worsen mortgage rates slightly if it reveals any significant surprises.

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... Lock 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 March 2nd, 2011 7:16 AM

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