Daily mortgage commentary

Greetings! Here's your Daily Commentary report compliments of Alan Russell & Princeton Capital! Call me today for current rates and market information at (650) 947-2296.           Thursday’s bond market initially opened well in negative territory but has since recovered most of those earlier losses. Unfavorable economic news caused the early selling and we have since seen a slow steady improvement. The stock markets are reacting favorable to the data with the Dow up 69 points and the Nasdaq up 37 points. The bond market is currently down 4/32, which with weakness late yesterday will still likely push this morning’s mortgage rates higher by approximately .125 of a discount point. However, right after the data was released early this morning, it looked like it was going to be an ugly morning. Yesterday’s 5-year Treasury Note auction did not go well at all. Most of the indicators that we use to measure investor interest in the sale showed very weak demand. It led to a little pressure in bonds during afternoon trading yesterday, but it wasn’t enough to cause across the board increases from mortgage lenders. Unfortunately, that gives us little to be optimistic about in today’s 7-year Note auction. These securities are closer in term to mortgage-related bonds than yesterday’s 5-year Notes, so this sale could be a bit more influential to mortgage rates. A strong investor demand could help boost the broader bond market after results are posted at 1:00 PM ET, leading to a slight improvement in mortgage pricing. Neither of this morning’s economic releases gave us results that were positive for the bond market or mortgage rates. The Labor Department said early this morning that 331,000 new claims for unemployment benefits were filed last week. This was down from the previous week’s revised 337,000 and close to forecasts, indicating that the employment sector strengthened last week. However, this was nearly a match to forecasts in low-importance report, so its impact on this morning’s pricing has been minimal. The big news came in the revised 2nd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. It showed that the economy actually grew at a 2.5% annual pace from April through June. This higher than the 2.1% that was expected and much higher than the preliminary estimate of 1.7% that was posted last month. Since long-term securities such as mortgage-related bonds tend to thrive in weaker economic conditions, the fact that the economy was much stronger last quarter than many had thought makes the data negative for the bond market and mortgage shoppers. Fortunately, the bond market appears willing forgive the news, at least at the moment. Tomorrow morning has two pieces of relevant economic data scheduled for release and it is the last trading before the holiday weekend. July's Personal Income and Outlays report is the first at 8:30 AM ET. This data will give us a measure of consumer ability to spend and current spending habits. Rising income means consumers have more money to spend. It is expected to show an increase of 0.1% in income and a 0.3% increase in spending. Since consumer spending makes up over two-thirds of the U.S. economy, weaker than expected numbers would be considered good news for the bond market and mortgage pricing. The second report of the morning will be the University of Michigan's revised Index of Consumer Sentiment for August. This sentiment index helps us track consumer willingness to spend and is similar to this past Tuesday's Consumer Confidence Index. It is expected to show no change from August's preliminary reading of 80.0. If it revises lower, consumers were less confident about their personal financial situations than previously thought. This would be good news for the bond market and mortgage rates because waning confidence usually means that consumers are less likely to make large purchases in the near future. The lower the reading, the better the news it is for mortgage rates. 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...       Alan Russell 161 South San Antonio Rd. | Los Altos, CA 95022 Ph: 650-947-2296 | Fax: 408-335-1118 alanrussell@princetoncap.com CLICK HERE TO STOP RECEIVING OUR REPORT