FOMC meeting on TuesdayMortgage markets were especially volatile last week, taking rate shoppers in Virginia on a roller-coaster ride. The week’s news schedule was full. It included debt ceiling debates, jobs figures, and ongoing maneuverings within the Eurozone.

Each story a material impact on mortgage rates and, as a result, rates varied wildly from day-to-day.

Throughout the early part of the week, mortgage rates fell.

Monday, bond markets improved as leaks of the congressional debt ceiling agreement surfaced. Investors approved of the accord’s general terms and bought U.S.-backed debt to prove it. Tuesday, when the final agreement was reached and the terms were made public, mortgage rates dropped again.

This is because the debt ceiling agreement is based on spending cuts and tax increases. In response, analysts revised lower their respective growth estimates for the United States, benefitting bonds.

By Thursday, markets were in full rally mode.

On the eve of the July jobs report, traders flocked to the ultra-safe bond market; “whispers” put the net jobs created figure at a negative. Wall Street feared the worst. By Thursday’s close, mortgage pricing was at its best levels since November 2010.

Friday morning, though, markets recoiled. When the Non-Farm Payrolls report showed much-better-than-expected growth, it triggered a bond market sell-off and rates reversed higher. Rates rose more Friday than on any single day since November 30, 2010.

If you were quoted a mortgage rate on Thursday, on Friday, the same mortgage rate cost 1 discount point more.

This week, rates may rise or fall — it’s too soon to tell.

Date

Time (ET)

Statistic For

Market Expects

Prior

08/09/11

08:30:00 AM

Productivity-Prel Q2

-0.60%

1.80%

08/09/11

02:15:00 PM

FOMC Rate Decision Aug

0.25%

0.25%

08/10/11

10:00:00 AM

Wholesale Inventories Jun

1.00%

1.80%

08/10/11

02:00:00 PM

Treasury Budget Jul

-$132.0B

-$165.0B

08/11/11

08:30:00 AM

Initial Claims

08/06/11

409K

400K

08/11/11

08:30:00 AM

Trade Balance Jun

-$48.0B

-$50.2B

08/12/11

08:30:00 AM

Retail Sales Jul

0.50%

0.10%

08/12/11

08:30:00 AM

Retail Sales ex-auto Jul

0.20%

0.00%

08/12/11

09:55:00 AM

Mich Sentiment Aug

62.5

63.7

08/12/11

10:00:00 AM

Business Inventories Jun

0.50%

1.00%

 

Friday afternoon, after markets closed, S&P downgraded the long-term debt of the U.S. government a notch. Typically, lower credit ratings means higher borrowing costs which leads to higher mortgage rates, among other things. However, it’s unclear how markets will react to the S&P decision.

Plus, the Federal Open Market Committee meets Tuesday and that, too, can affect markets.

As always, the prudent move is to lock your mortgage rate if its payment and terms are sensible. There’s too much volatility to know what markets might do tomorrow.

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Low rates reversingMortgage rates ended last week slightly better that at the start of the week  Economic data was worse-than-expected almost across the board, except for jobless claims.  VA,  FHA and conforming mortgage rates in Virginia improved by just over one-eight of a discount point.

Markets grappled with the just-released Fed Minutes which weighed heavily on investors and on Wall Street.With the release of the minutes, it’s increasingly clear that the Federal Reserve will end its support for bond markets on schedule in June, and that a Fed Fund Rate hike is possible within the next 12 months.

Not surprisingly, the date of the Fed Minutes release — Wednesday — was the singular “down day” for mortgage markets last week.

After falling for 4 straight weeks, Richmond mortgage rates appear to have troughed. This week they could rise, and there’s no shortage of data on which for bonds for trade.

  • Tuesday : New Home Sales; Speeches from Fed’s Plosser and Bullard
  • Wednesday : Durable Goods; FHFA Home Price Index
  • Thursday : GDP; Initial Jobless Claims
  • Friday : Core PCE; Pending Home Sales; Consumer Sentiment

There’s other forces on markets, too. First, there are 3 bond auctions — a 2-year, a 5-year, and a 7-year. Weak demand for any of the three will lead mortgage rates higher.

And, second, this is a holiday week. Memorial Day is next Monday and, with the 3-day weekend ahead, expect large numbers of Wall Streeters to skip out on Friday (and likely part of Thursday, too). As the week concludes, therefore, bond volume will thin, amplifying mortgage rate movement — up or down.

If you’re shopping for a mortgage, it’s a good time to look at locking in. As the week progresses, mortgage rates should become less predictable and more volatile.

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Mortgage rates fluctuate daily – sometimes even multiple times a day. Have you ever wondered where those rates come from or why?

The answer lies on Wall Street – specifically the trading of Mortgage Backed Securities (MBS). MBS trading could result in a dramatically higher or lower payment when you are ready to lock in your rate. The loan originator that led you here uses RateAlert, a real time MBS trading feed monitoring system to help you secure lower rates and protect yourself from costly market trading movements that affect your interest rate in real time.

For a more detailed explanation of how mortgage rates are determined watch this video.

To sign up for regular Virginia mortgage rate updates click here.

www.PaulCantor.info

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This week trading will likely be quiet with the religious holiday. Most all of the data points this week are centered on the housing sector; starts and permits for Mar, new and existing home sales, the NAHB housing market index Monday and the FHFA housing price index on Thursday.

Date Time (ET) Statistic For Market Expects Prior
04/19/11 08:30:00 AM Housing Starts Mar 520K 479K
04/19/11 08:30:00 AM Building Permits Mar 540K 517K
04/20/11 10:00:00 AM Existing Home Sales Mar 5.00M 4.88M
04/21/11 08:30:00 AM Initial Claims 04/16/11 390K 412K
04/21/11 10:00:00 AM Philadelphia Fed Apr 33 43.4
04/21/11 10:00:00 AM Leading Indicators Mar 0.20% 0.80%
04/21/11 10:00:00 AM FHFA Housing Price Index Feb NA -0.30%

The bond market will close early Thursday and will remain closed Friday in observance of the Good Friday holiday. The stock markets will be open Thursday for a full day of trading, but will also be closed Friday. The markets will reopen for regular hours Monday morning. The early close and Friday holiday may lead to some volatility in bonds Thursday afternoon as investors protect themselves over the long weekend.

 

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In an announcement this morning the US Government said to will begin selling off the mortgage backed securities it has purchased starting in 2008 to keep rates low.   The sale of some $142 billion in securities will begin this month.  The price of mortgage backed securities fell on this news meaning rates will higher this morning.

 

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Existing and new home sales are the main focus but unlikely to show any change in the trend of weak sales that has been the situation for two years. Japan’s problems with their nuclear reactors remain but the latest reports imply some progress on a couple of reactors while  another reactor is weakening. In Libya the UN forces clobbered Libyan positions with heavy use of missiles but Qaddafi remains defiant. Treasuries and mortgage rates are likely to stay within a tight range as long as there is no change in the situations in Japan and in the Mideast.

 

Date Time (ET) Statistic For Market Expects Prior
03/21/11 10:00:00 AM Existing Home Sales Feb 5.05M 5.36M
03/22/11 10:00:00 AM FHFA Housing Price Index Jan NA -0.30%
03/23/11 10:00:00 AM New Home Sales Feb 287K 284K
03/24/11 08:30:00 AM Initial Claims 03/19/11 384K 385K
03/24/11 08:30:00 AM Durable Orders Feb 1.10% 3.20%
03/24/11 08:30:00 AM Durable Orders ex Transportation Feb 1.80% -3.00%
03/25/11 08:30:00 AM GDP – Third Estimate Q4 2.90% 2.80%
03/25/11 08:30:00 AM GDP Deflator – Third Estimate Q4 0.40% 0.40%
03/25/11 09:55:00 AM Michigan Sentiment – Final Mar 68 68.2

 

The stock market, after the strong selling on panic moves is likely to rebound and recover most of the losses on the indexes. Gold and oil prices are likely to increase after a volatile last week. Through the week as long as investors return to equity markets the bond and mortgage markets will see prices fall and yields increase. The week is very likely to be volatile from day to day with unfolding news out of Japan and the Mideast. We do not expect interest rates to increase a lot, but we also don’t see any major decline this week. Still suggest using the recent rate decline to get deals done and not get enthused about lower rates. Interest rates are not likely to fall much while the wider perspective is still bearish as the US economy improves and the ECB likely to raise rates.

 

All this volatility means Richmond area mortgage rate shoppers should consider locking this week.  Call me at 804-433-1510 to discuss locking a mortgage rate

 

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