Our Real Estate Blog

Mortgage Rates (8/27/2010)

August 29th, 2010 9:05 PM by Lehel S.

Friday's bond market has opened in negative territory following a positive open in stocks and mixed economic data. The major stock indexes are rallying during morning trading with the Dow up 103 points and the Nasdaq up 20 points. The bond market is currently down 14/32, which will likely push this morning's mortgage rates higher by approximately .125 of a discount point.

The first of today's two relevant economic reports was a revision to the 2nd Quarter Gross Domestic Product (GDP). It did show a downward revision from last month's preliminary estimate, but the 1.6% annual rate of growth was slightly higher than forecasts were calling for. This means that while the economy did grow at a much slower pace during the 2nd quarter than previously announced, it appears to be at a little quicker rate than revised expectations. While the downward revision is favorable for bonds in general, today's higher than expected reading is negative for bonds. Also contribu tion to the selling was a slightly upward revision to a key inflation reading within the data. 

The University of Michigan revised their Index of Consumer Sentiment for August late this morning. They announced a reading of 68.9 that fell short of forecasts. That is good news for the bond market because lower levels of consumer confidence means consumers are less likely to make large purchases in the near future.

Also worth noting was a speech by Fed Chairman Bernanke late this morning. He spoke at a regional Fed conference in Jackson Hole, WY. His speech touched on the Fed's economic outlook, so the markets were paying attention. However, he didn't reveal any shocking news that the markets weren't already aware of. He clarified a few points, such as why the Fed is now buying more debt. But none of his comments directly affected mortgage pricing.

Yesterday's 7-year Treasury Note auction actually went pretty well. It was basically the m ost successful auction of the week and appeared to have relatively strong investor demand, at least when compared to the week's other sales. This can be considered good news for mortgage borrowers because investor appetite for long-term securities such as mortgage-related bonds needs to remain good for mortgage rates the stay near current levels or move lower.

Next week is packed with relevant economic data that may influence mortgage rates. There are important reports scheduled for release each day next week, beginning with Monday's posting of July's Personal Income and Outlays report. It will give us a measure of consumer ability to spend and current spending habits. It is not close to being the week's most important release, but is considered relevant enough to affect bond trading and mortgage pricing.





The rest of the week brings us several important reports including a key measurement of manufacturer sentiment and the almighty monthly Employment report. We will likely see plenty of volatility in the broader markets and mortgage rates as these reports will give us several different snapshots of the economy when concerns about the economic recovery are quite strong. Look for more details on next week's events in Sunday's weekly preview.

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. 
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Posted by Lehel S. on August 29th, 2010 9:05 PM

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