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Mortgage Rates (7/21/2010 - Afternoon Update)

July 21st, 2010 12:56 PM by Lehel S.

WEDNESDAY AFTERNOON UPDATE:


The bond market has reacted favorably to Fed Chairman Bernanke's testimony to the Senate Banking Committee. Mr. Bernanke didn't say anything that was a major surprise, but did hit some key points that are favorable to bonds and mortgage rates. He said that he expects key short-term rates to remain low for an "extended period," that the economic recovery will be slower than previously estimated and that the Fed could take further stimulus action of needed. He added that inflation remains lower than earlier forecasts.

All of those points are favorable to long-term securities such as mortgage-related bonds. This is particularly true of the inflation comments because inflation erodes the value of a bond's future fixed interest payments, making them less attractive to investors. 

The stock markets have moved lower with the Dow down 134 points and the Nasdaq down 32 points. The bond market has improve d from earlier levels, currently up 14/32. That is enough of a move to improve mortgage rates this afternoon by approximately .125 of a discount point. However, many lenders may opt to reflect this improvement in tomorrow's rates rather than revising today's pricing.

Mr. Bernanke will repeat his testimony tomorrow in front of the House Financial Services committee. He is not likely to say anything that would contradict or differ much from today's prepared statement. The question and answer portion of the proceeding could bring something of a surprise, but it is not of much concern to me.





The Labor Department will give us last week's unemployment figures early tomorrow morning. They are expected to say that 445,000 new claims for unemployment benefits were filed last week, which would be an increase from the previous week. The higher the number of claims, the better the news for bonds. But since this data tracks only a single w eek's worth of claims, it usually has a minimal impact on mortgage rates.

The National Association of Realtors will post June's Existing Home Sales figures late tomorrow morning. This report gives us a measurement of housing sector strength and mortgage credit demand, but as with all of this week's data it is not considered highly important. Current forecasts are calling for a decline in sales from May's totals. A larger than expected drop in sales would be considered good news for bonds and mortgage rates because a weak housing sector will make it difficult for the economy to recover anytime soon. However, unless this data varies greatly from forecasts it probably will not cause much of a change in mortgage rates.

June's Leading Economic Indicators (LEI) at 10:00 AM will also be posted late tomorrow. This Conference Board index attempts to measure economic activity over the next three to six months. While it is not a factual report, it still is conside red to be of moderate importance to the bond market. It is expected to show a 0.4% decrease, meaning that we may see noticeable pullback in economic activity over the next few months. A larger decline in the index would be good news for the bond and mortgage markets.

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. 
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Posted by Lehel S. on July 21st, 2010 12:56 PM

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