Tag: lock or float my rate?

Rate Update August 17, 2009

Posted on by Evan in Rate Update

Mortgage rates look like they’ll open up on par or better than they were on Friday morning.

Mortgage rates are benefiting from a global “flight-to-quality” as stock markets tumble around the globe (click this link to learn how stocks impact mortgage rates).  Investor sentiment around the world has taken a more pessimistic view of the economic recovery.

Where as stocks rallied over the previous few weeks on the idea that the worst was behind us.  Investors are now thinking that the economic recovery will be slow and gradual.

Shares in the Chinese Shanghai Composite Index were off 5.8% while Japan and Europe also traded lower.  This morning the S & P 500 is off 2.3%.

Looking ahead for the rest of the week we’ll be watching the stock market and an announcement from the US Treasury on Thursday regarding the volume of bond sales for next week.  The past few announcements have caused rates to temporarily rise.

Current outlook: float

Rate Update August 11, 2009

Posted on by Evan in Rate Update

Based on the rates sheets we have thus far mortgage rates remain unchanged from Friday, BUT we expect rates to improve by mid-morning.

Mortgage-backed bonds rallied yesterday and are following through again this morning on better than expected worker productivity numbers.  The more productive workers are the less wages corporations have to pay to produce a unit of output which is good news on the inflation front.

Looking ahead the two major story lines of the week will kick-off today.  First, the US treasury will begin 3 days of heavy treasury bill auctions this morning.  So long as foreign appetite remains strong for US debt mortgage rates should remain low.

Second, the Federal Reserve Open Market Committee begins day 1 of their 2 day meeting today.  Although we don’t expect any change to short-term interest rates their post meeting comments can always shake up the markets.

Current outlook: float at least until mid-morning

Rate Update August 6, 2009

Posted on by Evan in Rate Update

Mortgage rates are higher again this morning.

The US Treasury announced that they will offer more inflated-protected bonds in response to greater demand from buyers; especially China.  This is a sign that the market is concerned about future inflation which does not bode well for mortgage rates in the long-term.  I plan to blog about this subject in the near future.

In the short-term, attention is focused on tomorrow’s jobs report (click this link to learn why the jobs report is an important factor for mortgage rates). Jobless claims numbers out today suggest that the number of jobs lost in July could be less than expected which would put upward pressure on rates.  However, mortgage rates have risen by proximately .25% so the market may have a muted response if the report beats expectations.

Current outlook: neutral heading into tomorrow’s jobs report

Rate Update July 31, 2009

Posted on by Evan in Rate Update

After moving higher yesterday, mortgage rates have reversed back down to the levels seen on Wednesday.  Why the sudden reversal?

In yesterday’s ‘rate update’ video I reported that foreign participation in the US Treasury auctions were relatively light through Wednesday.  This is a bad sign for mortgage rates because if foreign investors don’t buy our bonds the US is forced to raise the yields on the notes to attract buyers.

In yesterday’s auction of 7-year notes foreign buyers showed up easing concerns in the marketplace.  As a result mortgage-backed bond prices rallied and recovered the losses incurred over the past 24 hours.

The Commerce Department reported better than expected GDP numbers this morning for the 2nd-quarter.  Good economic news is often bad for mortgage rates but a closer look into the GDP report shows troubling signs.  Consumer spending retracted in the 2nd-quarter after growing in the 1st and 1st-quarter GDP was revised lower.

For now we’re going to shift into a neutral position.

Current Outlook: neutral

Rate Update July 29, 2009

Posted on by Evan in Rate Update

Mortgage rates are modestly lower today for 30-day locks.

Despite treasury auction results from yesterday that are not encouraging; mortgage rates have managed to fall slightly on unanticipated news out of China.

The Chinese stock market fell 5.0% today on concerns that the Chinese Government would intervene in the economy to slow down the stock market.  Up until today the Chinese stock market had risen 89% on the year.

Since China is one of the biggest consumers of US-denominated bonds this move has diverted assets away from their domestic stock market and created additional demand for mortgage-backed bonds.  This is why mortgage rates have managed to move modestly lower.

As I explained on Monday, we still believe that the higher than average supply of US treasuries in the marketplace will do more harm than good.  We will keep our bias towards locking.

Current Outlook: bias towards locking on short-term transactions