Friday, April 1, 2016 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates continued lower today, despite a fairly strong showing in the Employment Situation report. The so-called 'jobs report' is the most important piece of economic data on any given month and it always has the potential to cause big moves in rates. This time around, with all the various other issues in the world, the market stayed calm today.
It has been a good week for the bond market, a confusing week for investors. Janet Yellen opened the door to another move lower in interest rates after a number of regional Fed officials were priming the pump for another rate increase. Yellen took control after regional Fed presidents were running off the last two weeks with their opinions - hopefully now markets will pay less attention to them, as she sent the message - I am in charge.
One of the reasons US interest rates have held at these low levels, bond investors are less optimistic about the economy. Yesterday marked the end of Q1. The quarter growth was anemic at best. March auto and truck sales missed the estimates for March, currently near record levels, but investors increasingly worried that it isn't sustainable as March's numbers missed estimates. This week we saw the 10yr drop to 1.78% and the MBS another 90plus BPS. Crude oil declined $2.82 even as the dollar weakened.
Next Week on Monday is February factory orders. Tuesday March ISM services sector index. FOMC minutes from the March 16th meeting. The rest of the week has a few Fed officials but little economic data. There will be no treasury borrowing next week. The dollar movement and the movement in crude oil next week will be some of the market interests.
I continue to believe rates are going to head even lower but the move this week may encourage some profit-taking. It is prudent now to think about locking some of the floated loans, particularly loans that are close to closing. Float loans that are weeks away from closing, at least for now. The stock market unfortunately still influences investors to an extent and we expect the key indexes to start next week higher.
In summary, as I suspected, February's NFP report, released this morning, had negligible effect on rates today. International growth concerns are controlling the market for now, and we are establishing a new treasury range (currently at 1.78%). Until something changes, the trend is our friend, and floating borrowers may see improved pricing. As always, if you are close to closing and do not have room to risk a higher rate, lock first, ask questions later.
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