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Wednesday’s bond market initially opened in positive territory, but has since
fallen well into negative ground. The stock markets were showing early
strength also however, instead of turning south the major indexes have
extended those gains when bonds moved lower. The Dow is currently up 104
points while the Nasdaq has gained 15 points. The bond market is currently
down 12/32, but dues to strength late yesterday we should see little change
in this morning’s mortgage rates if comparing to yesterday’s early pricing.
Unfortunately, this morning’s selling has erased a sizable rally in
mortgage-related bonds during afternoon trading yesterday. How much of an
increase you will see in this morning’s pricing depends on the size of the
downward revision your lender made late yesterday. The net difference
should be minimal from Tuesday’s morning rates.
The National Association of Realtors gave us their Existing Home Sales
report late this morning. They announced an increase of 0.6% in sales of
existing homes that pushed the number of sales to their highest level since
November 2009. That indicates housing sector strength that makes the data
negative for the bond market and mortgage rates. However, it was close to
forecasts and had little impact on this morning’s trading or mortgage
rates.
What helped to initially boost bond prices were prepared comments by Fed
Chairman Bernanke to the Joint Economic Committee of Congress. His first
words caused bonds to move higher as they indicated that inflation was not
a concern and that the Fed was ready to slow their current bond buying
program if needed. The lack of a specific estimate when that could begin
led many to believe that it was not in the foreseeable future. Since the
Fed buys bonds that affect mortgage rates, this was welcomed news in the
bond and mortgage markets. However, as the Q&A went on, Chairman
Bernanke was pressed for a better answer and his replies appear to have
contradicted what was originally taken from his prepared statement. The
indication that such a move could come as early as Labor Day or during the
4th quarter caused bond buying to turn into selling. That erased not only
the morning gains that appeared likely to improve rates another .250 of a
discount point on top of yesterday’s late rally, but also yesterday’s gains
altogether. That is a change of approximately .625 of a discount point from
what this morning’s rate were going to look like and what are actually
being posted.
There is something else scheduled for today that is likely to influence the
markets and mortgage rates. 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), although this morning’s comments should suffice with that.
The minutes be released at 2:00 PM ET, so if there is a market reaction to
them it will come during afternoon trading.
Besides the weekly unemployment update from the Labor Department early
tomorrow morning (expected to show that 348,000 new claims for unemployment
benefits were filed), we also will get April's New Home Sales data at 10:00
AM ET. It gives us a similar measurement of housing sector strength and
future mortgage credit demand as today’s Existing Home Sales report did,
but tracks a much smaller portion of housing sales. Actually, it is the
least important release of the week and probably will not have much of an
impact on mortgage pricing unless it shows a sizable variance from
forecasts. It is expected to show gains in sales from March's level,
meaning the new home portion of the housing sector also strengthened last
month.
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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