Daily 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.           Friday’s bond market initially opened in negative territory yet again following stronger than expected economic data, but has since rebounded into positive ground. The stock markets are reacting favorable to the same data, pushing the Dow up 63 points and the Nasdaq up 18 points. The bond market is currently up 5/32, which with yesterday’s afternoon strength should improve this morning’s mortgage rates by approximately .125 of a discount point. Yesterday’s late strength did not come from the 7-year Treasury Note auction. The sale was fairly weak and immediately after results were posted at 1:00 PM we saw bond prices worsen. However, by the end of the trading day, bonds recovered the post-auction losses but still remained in negative territory when trading closed for the day. I don’t believe too many lenders would have improved pricing intra-day as a result of that move, but it has helped improve this morning’s pricing. Today’s only relevant economic data was the second and final revision to the 3rd Quarter Gross Domestic Product (GDP) early this morning. It showed an upward revision from the previous estimate of a 3.6% annual rate of growth to a 4.1% pace, meaning the economy was stronger during the last quarter than many had thought. It was also the highest quarterly gain since the 4th quarter of 2011. That is clearly bad news for the bond market and mortgage rates because a strengthening economy makes long-term securities such as mortgage-related bonds less appealing to investors. Fortunately, this data is a bit aged at this point and traders are more interested in the current quarter’s activity that will be released next month, helping to prevent a significant jump in rates. The about face in this morning’s early bond trading is encouraging for mortgage rates. I have long said that we were likely going to see the benchmark 10-year Treasury Note yield reach the 2.90 – 2.95% range. That happened yesterday and again this morning, nearly touching 2.96% before retreating to its current level of 2.91%. If it stays above 2.90%, I believe we still could see pressure in bonds and mortgage rates. On the other hand, if it breaks below 2.90%, even briefly, I think we will see nice downward move. One key will be what happens this afternoon. It is common to see bond weakness during Friday afternoon trading, especially after a volatile week. If that weakness does not come forward this afternoon, we could see a short downward trend in mortgage rates start very soon. Next week brings us the release of a handful of economic reports that are relevant to mortgage rates. It also starts the two week holiday schedule with an early and holiday closure in recognition of Christmas and New Year’s Day. We do have data scheduled to be posted Monday that could influence the markets and mortgage rates. November’s Personal Income and Outlays report and December’s revised University of Michigan Index of Consumer Sentiment will both be released Monday morning. Look for details on next week’s calendar in Sunday’s weekly preview. 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