Todays market update

Tuesday’s bond market has opened in negative territory again as talks about the Fiscal Cliff become more encouraging that a resolution is near. The stock markets are showing minor gains with the Dow up 12 points and the Nasdaq up 11 points. The bond market is currently down 4/32, which with yesterday’s late weakness should push this morning’s mortgage rates higher by approximately .250 of a discount point. There is no relevant economic data set for release today, but we do have the first of this week’s two Treasury auctions that have the potential to influence mortgage rates. That would be the 5-year Treasury Note sale, followed by 7-year Notes tomorrow. If today’s sale was met with a strong investor demand, we could see strength in the broader bond market that leads to afternoon improvement in mortgage rates. On the other hand, a lackluster investor interest may create pressure in bonds and upward revisions to mortgage rates. Results of the auction will be posted at 1:00 PM ET, so any reaction will come during afternoon hours. November's Housing Starts will be released at 8:30 AM ET tomorrow. It is the week's least important report of the seven that are scheduled, so I don't see it causing much movement in mortgage rates unless it shows a huge variance from expectations. It is expected to show a decline in construction starts of new homes, hinting at a weakening housing sector. Generally speaking, an increase in new starts would be bad news for bonds and mortgage pricing because it points towards economic strength, but unless there is a significant surprise it will likely have little impact on tomorrow's mortgage rates. Tomorrow also has the 7-year Note sale that could help move mortgage rates, but that will be during afternoon hours. Results of it will be posted at 1:00 PM ET also, giving us a measurement of investor demand in mid-term securities. A high level of interest, particularly from overseas buyers, could fuel bond buying and a possible small improvement to mortgage pricing. The economic news gets much more active Thursday with the release of three monthly or quarterly reports in addition to the weekly unemployment update from the Labor Department. We will see the second revision to the 3rd Quarter GDP, November’s Existing Home Sales report and Leading Economic Indicators. None of the day’s releases are considered highly important or are likely to be a market-mover. However, with four bits of news on a single day with nothing of significance released yet in the week, we could see mortgage rates react noticeably to the data if they show a consensus of economic strength or weakness. 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