Our Real Estate Blog

Mortgage Rates (2/3/2011)

February 3rd, 2011 11:15 AM by Lehel S.

Thursday’s bond market has opened in negative territory following despite early stock weakness. Today’s economic data was more negative for bonds than favorable, but the stock markets are reacting opposite. The Dow is currently down 40 points while the Nasdaq has lost 15 points. The bond market is currently down 9/32, which will likely push this morning’s mortgage rates higher by approximately .250 of a discount point. 

Today’s movement in bonds is somewhat a point of concern because it pushes the yield on the benchmark 10-year Treasury Note above 3.50% (3.51%). That was considered to be a key level of resistance, meaning if it stays above that threshold, there is a good possibility of it moving higher. Reducing that concern some is that fact this coming right before tomorrow’s major employment data. It is common for securities to move ahead of extremely important reports as investors look to protect themselves from the pote ntial volatility that follows when the data is posted. Therefore, if we get favorable results tomorrow, this morning’s losses can easily be erased and the yield would fall below 3.50% again. 

Employee Productivity and Costs data for the 4th quarter was the first of this morning’s three reports. It revealed an increase in productivity of 2.6% that exceeded forecasts. This is good news for bonds and mortgage rates because strong levels of worker productivity allows the economy to grow without wage inflation concerns. Even a secondary reading that tracks employer costs was favorable to bonds with an unexpected decline. Overall, this data was the only good news in today’s releases.

The Labor Department said that 415,000 new claims for unemployment benefits were filed last week. This was well below the previous week’s total and short of expectations, indicating that the labor market was stronger than expected last week. That i s clearly negative news for bonds and mortgage pricing, but with it tracking only a single week’s worth of new claims its impact on mortgage rates has been fairly minimal this morning.

And last but not least, the Commerce Department said late this morning that new orders at U.S. factories for durable and non-durable goods rose 0.2% in December. This is only a minor increase, but since analysts were expecting to see a moderate decline in orders, this data is favorable for stocks and negative for bonds because it points toward a stronger manufacturing sector. In addition, a sizable increase to November’s orders has compounded the bad news.

The Labor Department will be in the spotlight tomorrow morning when they post January's Employment data at 8:30 AM ET. This report will give us the U.S. unemployment rate and the number of jobs added or lost during the month, among other related statistics. Analysts are expecting to see the unemployment ra te rise from 9.4% to 9.5% and that approximately 148,000 new jobs were added to the economy. A larger increase in the unemployment rate and a loss in payrolls would be great news for the bond market. It would probably create a bond market rally that erases this morning’s losses, leading to much lower mortgage rates tomorrow morning. However, if tomorrow's report reveals stronger than expected results, we can expect to see mortgage rates move higher.

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.
Posted in:General
Posted by Lehel S. on February 3rd, 2011 11:15 AM



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