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Monday’s bond market has opened well in positive territory, although well
short of erasing Friday’s sell-off. The stock markets are starting the week
in positive ground also with the Dow up 114 points and the Nasdaq up 12
points. The bond market is currently up 17/32 however, we will still see a
noticeable increase in this morning’s mortgage rates if comparing to
Friday’s morning pricing. Late selling Friday extended the morning’s bond
losses significantly and caused most lenders to revise their pricing higher
during afternoon trading, many of which revised more than once. Today’s
early gains have helped to recover a good portion of those losses from late
Friday, but we will still likely see an increase in pricing if comparing to
Friday’s early rates.
There is nothing of significance scheduled for today or tomorrow. The rest
of the week brings us the release of two relevant economic reports for the
bond market to digest in addition to the minutes from the last FOMC meeting
and two fairly important Treasury auctions. Only one of the economic
reports is considered to be of high importance and everything on the week’s
calendar will come during the middle and latter days of the week. This
means we are likely to see the most volatility in mortgage pricing between
Wednesday afternoon and Friday morning.
There are also some heavily watched corporate earnings releases scheduled
for the stock markets this week that can influence bond trading and
therefore, mortgage pricing several days. They start this afternoon with
the release of Alcoa’s earnings after the market closes. This company isn’t
necessarily important to gauging economic strength, but it is the first Dow
component company that posts earnings each quarter. Since it is the first
look into Dow-related earnings, it draws plenty of attention in the
markets. Generally speaking, weaker corporate earnings reports translates
into stock selling that should make bonds more attractive to investors. As
bond prices rise, yields fall and mortgage rates usually follow bond
yields.
The events we will be watching this week start Wednesday with the first of
two important Treasury auctions (10-year Notes) and the minutes from the
most recent FOMC meeting. Both are afternoon events at 1:00 PM and 2:00 PM
ET respectively, so any reaction in mortgage rates will come during
afternoon hours. There are also two monthly reports scheduled for Friday
morning (Producer Price Index and University of Michigan Consumer Sentiment
index) that are likely to affect bond trading and mortgage rates.
Overall, it is difficult to try to label one particular day as the most
important this week. Tomorrow could be the least important with no economic
events scheduled. As mentioned a couple times recently, I would be
extremely cautious floating an interest rate until the yield on the
benchmark 10-year Treasury Note nears 3.00%. Today’s gains have lowered it
to 2.67% from Friday’s 2.71%, but there is still room for further selling
in bonds that will continue to pressure mortgage rates. The single most
important day for the bond market is either Wednesday due to the 10-year
Note auction and the release of the FOMC minutes or Friday morning when the
two most important economic reports of the week will be posted.
Accordingly, I strongly recommend maintaining contact with your mortgage
professional if still floating an interest rate.
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... Lock if my closing was taking place over 60 days from
now...
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