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Last week rates increased to their highest levels in the last eight months.  The bond market has solidly broken out of its long tight range, meaning higher rates.  Concerns of higher interest rates in Europe, China and the rest of the BRICs as well as improving economic conditions will keep US rates from falling with the most likely path being up for rates.

After last weeks increase in interest rates the market will have supply to contend with. Treasury will conduct its quarterly refunding beginning Tuesday with $32B of 3yr notes, Wednesday $24B of new 10 yr notes and Thursday $16B of new 30 yr bonds. After the 10 yr not increased 29 basis points in yield and the 30 yr bond up 14 basis points the auctions should see good demand. This week doesn’t provide much data, in fact only weekly jobless claims that carry any significance. .

Date Time (ET) Statistic For Market Expects Prior
02/07/11 03:00:00 PM Consumer Credit Dec $2.5B $1.3B
02/09/11 07:00:00 AM MBA Mortgage Purchase Index 02/04/11 NA 11.30%
02/09/11 10:30:00 AM Crude Inventories 02/05/11 NA 2.59M
02/10/11 08:30:00 AM Initial Claims 02/05/11 413K 415K
02/10/11 08:30:00 AM Continuing Claims 01/29/11 3900K 3925K
02/10/11 10:00:00 AM Wholesale Inventories Dec 0.70% -0.20%
02/10/11 02:00:00 PM Treasury Budget Jan -$60.0B -42.6B
02/11/11 08:30:00 AM Trade Balance Dec -$40.7B -$38.3B
02/11/11 09:55:00 AM Mich Sentiment Feb 75.5 74.2

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Nothing of major concern Monday and Tuesday, leaving bond trading to be driven by the stock markets If the major stock indexes move higher, we will probably see more funds move away from bonds and into stocks. This would lead to higher mortgage rates as bond prices and yields move in opposite directions. Mortgage rates tend to follow bond yields, so we prefer to see bond prices go up, pushing rates lower.

The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important one as it will give us an indication for demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would likely result in upward afternoon revisions to mortgage rates.

With little monthly and no quarterly economic reports being posted, Thursday’s weekly release of unemployment figures may end up moving the markets and mortgage rates more than it traditionally does. The Labor Department is expected to announce that 413,000 new claims for unemployment benefits were filed last week, falling slightly from the previous week’s total. The higher the number of new claims for benefits, the better the news for the bond market and mortgage rates.

Early Friday morning December’s Goods and Services Trade Balance data will be posted. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates. It is expected to show a $40.7 billion trade deficit.

Despite being a light week in terms of economic releases and relate events, it is still relatively crucial for the mortgage market. We saw the yield on the benchmark 10-year Treasury Note break above 3.50% and close at 3.65% last week. This should be of concern for mortgage shoppers as the 10-year was trading in a well-defined range until late last week. Since mortgage rates follow yields, we need to see some stabilization very soon or yields (and rates) may be moving higher. I suspect it will be tough to fall below 3.5% unless we get some unexpected major news or a significant stock sell-off. Therefore, please be careful if still floating an interest rate this week as I believe we are set for a noticeable move in the very near future. However, the question is if it will be rates moving higher or lower from current levels

One key thing to keep in mind, US rates remain as low as we have had for generations.

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  • Keep your emotions in check and your eyes on the goal, and you’ll pay less when purchasing a home. Read

Visit houselogic.com for more articles like this.

Copyright 2011 NATIONAL ASSOCIATION OF REALTORS®

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The US Government reports January Unemployment rate drops to 9%.  (Not that this is a low unemployment rate nor the real unemployment rate subject of another post).  This shows the rate of employment to be higher than what the market had expected of 9.4% to 9.6%. However the number of new jobs created, 36,000, was much lower than anticipated. The severe winter weather may explain this.

A different measure of unemployment, which includes discouraged workers and those forced to work part-time because of the economy, fell to 16.1% in January from 16.7 in December,  its lowest level since April 2009.

http://news.yahoo.com/video/business-15749628/jobs-amp-the-markets-24076619

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Bernanke explains how the Fed’s tinkering with mortgage rate through the purchase of securities has helped the economy.

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2011 Mortgage Rates

For the third week in a row mortgage rates have risen, according to Freddie Mac’s Primary Mortgage Market Survey.  Although rates for home buyers and those refinancing have increased lately, mortgage rates are lower than they were this time last year.

To add to the pressure on home loan rates positive job numbers and retail sales this week have caused rates to rise.  Commodity prices are rising and at some point will be passed on to the consumer which will result in inflation.  Now is a good time to refinance ot make that home purchase.

Click here to request information on refinancing.

Click here to request information on buying a home.

Click here to receive weekly mortgage market update.

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In a statement yesterday the Fed is punting its authority over Reg-z (Truth-in-Lending) disclosures to the to be formed  Consumer Financial Protection Bureau per the Dodd Frank Reforms.   Their is still uncertainty regarding  loan officer / lender compensation and if different rates may be offered by paying more or less at closing (points) after April 1st of this year.

Read the Press Release.

More to come.

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FHA announced the extension of the anti-flipping wavier through the end of 2011.  This will help stabilize the market and make financing foreclosed homes easier..

FHA regulations typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days.   FHA today posted a notice extending this waiver through the remainder of 2011.  The wavier allows buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales..

Read the full notice.

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Tensions in Egypt, higher oil prices, higher than expected home sales, and the Fed’s meeting made last week a busy week for financial markets.  Mortgage bond prices rose last week pushing mortgage interest rates lower, mostly due to foreign investment in the US due to the uncertainty in Egypt, several Treasury auctions and most resulted in decent foreign demand. Stock weakness along with weaker than expected GDP figures also led to rate improvements Friday afternoon. Mortgage bonds ended the week positive by about 1/8 to 1/4 of a discount point.

This Week is employment week on Friday, between Monday and Friday however there are a number of key economic reports. The markets start Monday with developments over the weekend in Egypt and the equity markets looking toppy and possibly headed for a long overdue correction. At the end of last week the famous 10 yr treasury note yield fell to 3.31% on Friday and closed at 3.33%, the bottom of its six week trading range (33 market days). A break in stocks and increased fears about the uprisings in Tunisia and Egypt should push interest rates lower on safety moves, if however stocks hold and there is no escalation of concerns in the mid-east the 10 yr and mortgages will move back to the top of their ranges on yields

Date Time (ET) Statistic For Market Expects Prior
01/31/11 08:30:00 AM Personal Income Dec 0.50% 0.30%
01/31/11 08:30:00 AM Personal Spending Dec 0.60% 0.40%
01/31/11 08:30:00 AM PCE Prices – Core Dec 0.10% 0.10%
02/01/11 10:00:00 AM Construction Spending Dec -0.50% 0.40%
02/01/11 03:00:00 PM Auto Sales Feb NA 3.90M
02/01/11 03:00:00 PM Truck Sales Feb NA 5.56M
02/02/11 07:00:00 AM MBA Mortgage Purchase Index 01/28/11 NA -12.90%
02/02/11 07:30:00 AM Challenger Job Cuts Jan NA -29.00%
02/02/11 08:15:00 AM ADP Employment Change Jan 150K 297K
02/03/11 08:30:00 AM Productivity-Prelim Q4 2.20% 2.30%
02/03/11 08:30:00 AM Unit Labor Costs Q4 0.00% -0.10%
02/03/11 08:30:00 AM Initial Claims 01/29/11 425K 454K
02/03/11 08:30:00 AM Continuing Claims 01/29/11 3925K 3991K
02/03/11 10:00:00 AM Factory Orders Dec -0.70% 0.70%
02/03/11 10:00:00 AM ISM Services Jan 57 57.1
02/04/11 08:30:00 AM Nonfarm Payrolls Jan 150K 103k
02/04/11 08:30:00 AM Non-farm Private Payrolls Jan 163K 113k
02/04/11 08:30:00 AM Unemployment Rate Jan 9.60% 9.40%
02/04/11 08:30:00 AM Average Workweek Jan 34.3 34.3
02/04/11 08:30:00 AM Hourly Earnings Jan 0.20% 0.10%

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Economic data this week has Dec personal income and spending, the ISM manufacturing and service sectors indexes, Jan auto sales, Dec construction spending and the employment report. Early forecasts for all non-farm job growth is for an increase of 150K jobs, private non-farm jobs up 163K and the unemployment rates at 9.6%, up 0.2% from Dec. There are no Treasury auctions this week.

Mortgage interest rates have been very stable now for the past five weeks, not a bad thing as consumers continue to digest the spike up in rates last Nov and early Dec. If the rate markets do improve this week it will present an opportunity to get deals done, unlikely any rate improvements will last long with the economic outlook improving. Lots of talk about inflation, although it hasn’t shown itself yet with rates so low just the thought of it will keep longer term rates for holding these low levels for long.

Tuesday and Friday look to having the highest potential for volatile for mortgage rates. Friday’s Employment report is the most important piece of data, but Tuesday’s ISM Index draws a lot of attention also. We could also see movement in rates tomorrow morning following the activity at the end of last week. If we get weaker than expected results from Tuesday’s ISM report and Friday’s employment data, we should see rates close the week lower than last Friday’s closing levels. If the data shows stronger than expected results, we may see mortgage rates move higher for the week. With some very important data being posted over the next five days, I strongly recommend keeping fairly constant contact with your mortgage professional if still floating an interest rate.

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