Monday, December 30, 2013 - Article by: James Brooks - Polaris Home Funding Corp -
By James Brooks
The stock markets are mixed with the Dow up 8 points and the Nasdaq down 10 points. The bond market is currently up 5/32, which should improve this morning's mortgage rates by approximately .125 of a discount point if comparing to Friday's morning pricing. Afternoon weakness Friday caused some lenders to revise rates slightly higher, so if your lender did post an intra-day upward revision Friday afternoon, this morning's improvement should be a little more than that.
There is nothing of importance scheduled for release today. This morning's early bond gains are not much of a surprise and should continue through tomorrow barring some unexpected economic or geopolitical news. It is a holiday-shortened week with only two monthly economic reports scheduled for release that are relevant to mortgage rates, but one of them is considered to be highly important to the bond and mortgage markets.
The Conference Board will post their Consumer Confidence Index (CCI) for December late tomorrow morning. This is a fairly important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial and employment situations, they are more apt to make large purchases. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely by market participants and can affect mortgage rate direction. Current forecasts are calling for a large increase in confidence from November's reading of 70.4. Analysts are expecting tomorrow's release to show a reading of 77.1, meaning consumers felt much better about their own financial situation than they did in November. The lower the reading, the better the news it is for bonds and mortgage pricing.
The bond market will close at 2:00 PM ET tomorrow ahead of the New Year's Day holiday, but the stock markets are scheduled to be open for a full day of trading. All banks and major U.S. financial markets will be closed Wednesday for the holiday and will reopen Thursday morning for regular hours. As a result of the holiday schedule, we should see lighter than normal trading in the bond market. However, I don't believe it will be as thin as we saw last week. That should help prevent larger negative moves in bonds on days with little or no news to justify the move like we saw last week.
Overall, I am expecting to see Thursday be the most active day for mortgage rates, although tomorrow morning could also be fairly busy as the year comes to an end. The benchmark 10-year Treasury Note yield closed last week at 3.00%, which is above the previous key level of 2.95%. So today's move lower (currently 2.98%) is welcomed news. Due to last week's extremely light trading volume, I was not too concerned about it closing at that level and today's move is a big step in right direction. Still, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float 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.
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