Tuesday’s bond market has opened slightly in negative territory, extending
yesterday’s late selling. The stock markets are fairly calm with the Dow up
1 point and the Nasdaq down 4 points. The bond market is currently down
3/32, which with yesterday’s late selling should equate to an increase of
approximately .250 of a discount point in this morning’s rates if comparing
to Monday’s morning pricing.
As suspected, yesterday’s early gains in bonds turned into afternoon
selling, continuing last week’s pattern. Does this mean that this morning’s
weakness will turn into afternoon strength and an improvement to mortgage
rates? Not exactly. I still see an overall negative tone in the bond
market, making it difficult for mortgage rates to improve. However, the
benchmark 10-year Treasury Note is currently yielding 1.97%. This is a
level that we could see buyers come into bonds. As we get closer to 2.00%,
I believe we will see more support that could help push mortgage rates a
little lower in the very near future.
There is nothing of importance on today’s calendar, but we do have three
events tomorrow that may influence mortgage rates. The first will come from
the National Association of Realtors at 10:00 AM ET, who will give us their
Existing Home Sales report. This data tracks resales of existing homes in
the U.S. during April, giving us a measurement of housing sector strength.
This type of data is relevant because a weakening housing sector makes a
broader economic recovery less likely. Current forecasts are calling for an
increase in home sales between March and April. Ideally, the bond market
would prefer to see a decline, indicating housing sector weakness. A large
increase in sales could lead to bond weakness and a small increase in
mortgage rates tomorrow morning since a strengthening housing sector raises
optimism about broader economic growth.
Also late tomorrow morning will be testimony from Fed Chairman Bernanke to
the Joint Economic Committee of Congress. He will be updating them on the
status of the economy and the Fed’s outlook for future growth and monetary
policy. This will be watched closely and is one of those speaking
engagements that can cause considerable movement in the financial markets
and mortgage rates.
Lastly, the minutes of the last FOMC meeting will be released tomorrow
afternoon. Market participants will be looking for how Fed members voted
during the last meeting and any comments about inflation concerns in the
economy and economic growth. The goal is to form opinions about the Fed’s
next move regarding interest rates and their current bond-buying program
(QE3). Since the minutes will be released at 2:00 PM ET, if there is a
market reaction to them it will be evident during afternoon trading.
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...
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