Wednesday’s bond market has opened in positive territory, recovering some of yesterday’s afternoon sell-off. Stocks are showing minor losses with the Dow down 69 points and the Nasdaq down 26 points. The bond market is currently up 4/32 (1.86%), but sizable losses yesterday afternoon are going to cause an increase in this morning’s mortgage rates of approximately .125 of a discount point if compared to Tuesday’s early pricing. You likely saw an intraday upward revision in rates yesterday, possibly more than one change. If so, you should see a noticeable improvement this morning as mortgage bonds rebound. 4/32 Bonds 30 yr - 1.86% 69 Dow 35,298 26 NASDAQ 14,480
Indexes Affecting Rate Lock LowNegativeHousing Starts (New Home Construction)December's Housing Starts started this week’s economic calendar at 8:30 AM ET. The Commerce Department announced a 1.4% rise in new home groundbreakings, exceeding forecasts by a little. The secondary reading that tracks newly issued permits (sign of future groundbreakings) was also a bit higher than expected. These readings are a sign of modest growth in the new home portion of the housing sector, but since the report carries a low level of importance in the markets, we haven’t seen much of a reaction to the numbers. MediumUnknownTreasury Auctions (5,7,10,20,30 year)We also have the results of today’s 20-year Treasury Bond auction to watch this afternoon. Ideally, we would see a strong demand from investors that leads to bond strength and lower mortgage rates later today. However, the heavy negative momentum in the bond market currently makes it difficult to be optimistic about this sale. Results will be posted at 1:00 PM ET, meaning this is an early afternoon event for rates. HighNegativeInflation News So what is behind this significant sell-off in bonds and spike in mortgage rates over the past couple weeks? There is no single, clear reason for it even though there is plenty of speculation. The common theory is the Fed’s shift to a more aggressive approach in tackling stubborn inflation that has reached decades-high levels. While that is a good theory and is likely contributing to the sell-off, it shouldn’t be a surprise to traders at this point. There were obvious signs a change was coming early last month when the term transitory started to be omitted when the topic of inflation was being discussed. But again, the consensus regarding the Fed taking action sooner than later was formed well over a month ago. That leaves us to believe there is another underlying force behind the weakness. HighUnknownFederal Reserve StatementThere is an FOMC meeting taking place on the 25th and 26th of this month that may show some clarity as to what the Fed will actually do, compared to rampant speculation at this point. Until that meeting adjourns, don’t be surprised to see continued pressure in the bond market and mortgage rates. Hopefully this ugly period is setting us up for a post-FOMC rally. LowUnknownWeekly Unemployment Claims (every Thursday)Tomorrow has two pieces of data scheduled, not that the markets care much about economic reports at the moment. First will be last week’s unemployment figures at 8:30 AM ET. They are expected to show 211,000 new claims for unemployment benefits were filed last week. The higher the number of initial filings, the better the news it is for rates. MediumUnknownExisting Home Sales from National Assoc of RealtorsDecember's Existing Home Sales from the National Association of Realtors is set for release at 10:00 AM ET tomorrow. This data will give us detailed information about housing sector strength and mortgage demand by tracking home resales in the U.S. It is expected to show a small decline in sales from November's level, meaning the housing sector softened slightly last month. Ideally, bond traders would like to see a large decline in sales, pointing towards sector weakness because weaker housing makes broader economic growth more difficult. As long as we don't see a significant surprise in sales, it shouldn't have a noticeable impact on mortgage rates.
Float / Lock Recommendation 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... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.