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Wednesday’s bond market has opened in negative territory following early
stock gains. The major stock indexes are showing noticeable gains with the
Dow up 83 points and the Nasdaq up 35 points. The bond market is currently
down 10/32, which should push this morning’s mortgage rates higher by
approximately .125 - .250 of a discount point over yesterday’s morning
pricing.
There was no relevant economic news or other events scheduled for release
this morning, but the Fed accidently sent out the minutes from the last
FOMC meeting early this morning rather than at 2:00 PM ET as scheduled. The
error isn’t a big deal as it simply means we get to see the markets react
during morning hours rather than afternoon. The minutes didn’t really show
anything new although they did reiterate some members’ concerns about the
long-term impact the current stimulus policy could have on inflation and
interest rates. However, it appears that the current consensus is that the
problem would be able to be controlled. Overall, nothing really too
concerning or joyous about the release and it appears the impact on today’s
bond trading and mortgage pricing has been minimal.
We do have the 10-year Treasury Note auction to watch later today. It is
the first of this week’s two Treasury auctions that have the potential to
affect bond trading and mortgage rates and is likely a contributing factor
to this morning’s early bond weakness. It is common to see some weakness in
bonds ahead of the sales as participating firms sell current holdings to
prepare for them. This weakness is usually only temporary if the sales are
met with a decent demand. The results of the auctions will be posted at
1:00 PM ET, so look for a reaction to come during afternoon hours. If
demand in the sale from investors was strong, the bond market could rally
during afternoon trading, leading to lower mortgage rates. If the sales
were met with a poor demand, the afternoon weakness may cause upward
revisions to mortgage pricing.
Besides the 30-year Bond auction set for tomorrow, the only other thing we
need to watch is the weekly unemployment update from the Labor Department.
Analysts are expecting them to announce that 365,000 new claims for
unemployment benefits were filed last week, down 20,000 from the previous
week. That would indicate the employment sector strengthened last week,
making the data negative for the bond market and mortgage rates. However,
since this report tracks only a single week’s worth of initial claims, it
usually takes a wide variance from forecasts for it to influence mortgage
rates. The higher the number of new claims, the better the news it is for
the bond market and mortgage rates that tend to thrive in weaker economic
conditions.
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...
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