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James Brooks

Mortgage Rates Improve 12-10-2015

Thursday, December 10, 2015 - Article by: James Brooks - Polaris Home Funding Corp - Message

By James Brooks

The bond market is up 1/32 (2.23%),we still should see a slight improvement in today's mortgage rates.

We saw some strength in bonds yesterday afternoon following the results of the 10-year Treasury Note auction. Several of the benchmarks we use to gauge investor demand showed a decent level of interest in the securities. That led to gains in the broader bond market and actually led to some lenders improving rates before the end of the day yesterday. Those results help us to remain optimistic about today's 30-year Bond auction. If it is met with a fairly strong demand we could see the same events repeat themselves this afternoon. Results will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading.

Today's only data was last week's unemployment figures at 8:30 AM ET. They revealed a jump in new claims for unemployment benefits, showing 282,000 initial claims were filed. This was higher than the 269,000 that was expected, indicating the employment sector was softer than many had thought last week. While any data showing weakening employment conditions is good news for bonds, this was only a weekly snapshot and wasn't enough of a move to draw much attention or reaction in the bond or mortgage markets.

All three of this week's monthly economic reports are being posted tomorrow morning. November's Retail Sales report is the first at 8:30 AM ET. This report will give us a key measurement of consumer spending by tracking sales at retail level establishments. This data is highly important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rapidly rising consumer spending raises the possibility of seeing solid economic growth. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in retail sales will likely drive bond prices lower and mortgage rates higher tomorrow morning. Current forecasts are calling for an increase of 0.3% in November's sales.

The second report of the day will be November's Producer Price Index (PPI), also 8:30 AM. It measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices, giving a more stable reading for analysts to consider. If this release reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and drive mortgage rates higher. If we see in-line or weaker than expected numbers, the bond market should respond well and mortgage rates could fall. Current forecasts are showing a 0.1% increase in the overall index and a 0.1% decline in the core data.

The final report of the week is the release of December's preliminary reading to the University of Michigan's Index of Consumer Sentiment just before 10:00 AM ET. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly if it shows a sizable miss from forecasts. Consumer sentiment or confidence is tracked because the more comfortable consumers are about their own financial situations, the more likely they are to make a large purchase in the near future. Since consumer spending makes up such a large part of our economy, any related data is watched closely. It is expected to show a reading of 91.6, which would be a decline from last month's final reading of 93.1. A larger decline in confidence would be considered good news for the bond market and mortgage rates.

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.

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