Mortgage Rate Watch

Float Bias Back as Mortgage Rates Hold Steady After Jobs Data

Victor Burek — Fri, 06 Nov 2009 15:43:59 GMT

Mortgage rates continued to hold steady yesterday as prices of mortgage backed securities slowly inched higher yesterday. AQ and MG were discussing the supply and demand dynamics of the MBS market yesterday, citing several reasons for the stable range being held by MBS coupons, even as benchmark 10 year Treasury rates held near recent highs. HERE is an explanation of the logic behind MBS stability. A few lenders who were pricing loans conservatively in the morning eventually repriced for the better by afternoon. Before we get into today’s data, I want to give a quick update on the First Time Home Buyer Tax credit. Two days ago the Senate passed a bill extending the credit and yesterday, yesterday the House of Representatives also passed the bill which in effect extends the tax credit...(read more)

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Mortgage Rates Hold in Range. Locking Still Favored Over Floating

Victor Burek — Thu, 05 Nov 2009 18:15:53 GMT

The Federal Reserve released their statement on monetary policy and economic outlook yesterday. Although there were some changes to the text of the statement, markets got what they were expecting. The FOMC held the Fed funds rate at its current level and gave a cautiously optimistic outlook on the economy. After some early morning weakness. prices of mortgage backed securities improved after Fed statement and closed basically unchanged on the day. Unfortunately, falling prices early in the session led some lenders to reprice for the worse. However, some, not all, lenders repriced for the better later in the day. If you would like to read more on the Fed statement, check out AQ’s analysis. READ MORE . I also recommend reading the MBS OPEN for an in-depth discussion on how the Fed's...(read more)

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Mortgage Rates Pressured Higher Ahead of FOMC Statement. Did You Lock?

Victor Burek — Wed, 04 Nov 2009 17:09:46 GMT

Mortgage rates ticked higher yesterday as prices of mortgage backed securities were pressured lower by a selloff in the long end of the Treasury yield curve. To remind readers, as prices of MBS and Treasuries fall, their yields or rate increase…price and yield have an inverse relationship. No major report or headline caused the moved lower, AQ and MG point out that it was a function of Friday's bond market rally being unwound before today's Treasury auction announcement and the FOMC meeting which was ignited by a "Build America Bond" issuance pricing in California. Their brains are complicated but we make a good team! Whatever the reason was, price losses held into the close and the majority of lenders repriced for the worse. This morning the Mortgage Bankers’...(read more)

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Floating is Risky Ahead of Major Market Events

Victor Burek — Tue, 03 Nov 2009 17:16:55 GMT

Yesterday, following a better than expected read on Manufacturing and Pending Home Sales, benchmark rates backed up and prices of mortgage-backed securities moved lower, forcing several lenders to reissue new rate sheets with lower prices, therefore increasing consumer borrowing costs. The economic calendar was very light today. The most significant report released was Factory Orders. This data shows the monthly change in the dollar amount of new orders for both durable and non durable goods. Basically, it lets market participants know how busy factories will be in the future as they work to fill the orders. In August, Factory orders in fell 0.8% following July’s 1.4% increase. For September, factory orders rose 0.9%. Economists surveyed were expecting a 1.0% increase. There was not much...(read more)

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Mortgage Rates in Aggressive Side of Range

Victor Burek — Mon, 02 Nov 2009 18:04:55 GMT

Last week ended on positive note for mortgage backed securities and mortgage rates. As stock indexes fell, market participants re-allocated portfolios from risky assets to safer investments, resulting in added demand for government AAA rated fixed income securities. The benchmark 10 yr Treasury note moved back under 3.40% and MBS closed near their best levels in the past few weeks. Most lenders repriced for the better. This morning we had a several economic reports hit the news wires. First out was a read on the manufacturing sector with the ISM Manufacturing Index. The Institute for Supply Management surveys more than 300 manufacturering executives across the country on the strength of business conditions. Readings above 50 indicate expansion while readings below 50 indicate contraction. Since...(read more)

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Mortgage Rates Back in the Range After Bad Day for Bonds

Victor Burek — Fri, 30 Oct 2009 15:09:47 GMT

Mortgage rates rose yesterday after a better than expected advance read on third quarter GDP sent benchmark yields higher early in the trading session. Making matters worse for the fixed income sector was a recovery rally in stocks and a 1pm Treasury auction. As explained in previous posts, added supply of Treasury debt can have negative effects on yields as traders look for any reason to force rates higher in an effort to earn greater returns. Its the old econ 101 principle: if supply is greater than demand, then prices must fall enough to entice demand. Well...when Treasury prices fall, yields rise, and so do mortgage rates. Yesterday the deck was stacked against the rates market...better than expected econ data, a Treasury auction, and rallying stocks! That's why mortgage rates moved...(read more)

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Mortgage Rates Higher After GDP, Jobless Claims Data

Victor Burek — Thu, 29 Oct 2009 16:58:09 GMT

Mortgage rates fell a few basis points yesterday as benchmark Treasury yields moved lower in the range. The extended rally in the rates market helped MBS prices tick higher which eventually resulted in lenders repricing for the better. An above average turnout at the 5yr note auction combined with an unexpected drop in New Home Sales helped spark the move lower in yields . To remind readers, as prices of MBS move higher, lenders are able to pass along lower mortgage rates. This morning the U.S. Department of Labor released the Weekly Jobless Claims report. This data totals the number of Americans who filed for first time unemployment benefits during the prior week. Additionally, this data provides continuing claims which totals the number of Americans that continue to file for unemployment...(read more)

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Lock/Float Strategy Successful. Mortgage Rates Lower

Victor Burek — Wed, 28 Oct 2009 15:28:15 GMT

Although the market briefly tested the reliability of our lock/float strategy on Monday ("lock at the price highs, float at the price lows"), mortgage-backed security prices are returning to the confines of our comfort zone...also known as "THE RANGE". Following the seemingly bottomless rates selloff that occurred on Monday, benchmark Treasury and MBS prices underwent a corrective rally yesterday. Buying beget more buying and before we knew it, the 10yr Treasury note yield was back under 3.50%, helping MBS prices move considerably higher. A strong auction of $44 billion 2 year Treasury notes helped add momentum to the rally as well. MBS prices held into the close which allowed many lenders to republish rate sheets for the better, lowering consumer borrowing costs. Again...(read more)

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Mortgage Rates Teetering on Breakdown; Should the FTHB Tax Credit Be Extended?

Victor Burek — Tue, 27 Oct 2009 15:14:00 GMT

Mortgage rates were pushed higher yesterday after benchmark Treasury yields moved higher, outside the well defined range that has kept rates relatively stable since August. New supply of Treasury debt combined with several psychological factors pressured MBS prices lower and forced lenders to reprice for the worse. Despite this move lower, we are not yet convinced this a long term move outside the range. The market is still very nervous about a stock sell off and another dip lower in the recession. This will likely keep demand for AAA rates Treasury debt high, which would foster a steady interest rate environment. Following yesterday’s data free day, today we get a few economic reports to digest. First out this morning was the S&P Case Shiller Home Price Index which tracks the monthly...(read more)

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Steady Mortgage Rates Put to The Test as Fed Exits Treasury Market

Victor Burek — Mon, 26 Oct 2009 17:00:00 GMT

The well defined range we have followed to gauge our lock/float sentiment is being challenged. Since the range proved itself a reliable indicator of demand for debt in the benchmark fixed income market, we have advised consumers to lock when mortgage prices were near the high side of the range and to float when MBS prices were at the the low side of the range. Well...this morning the range broke and prices fell through a key level of support. While we are not in panic mode, our preferred indicator of lock/float strategy is being put to the test. The week ahead brings us several economic reports and four Treasury debt auctions. Today the Treasury Department will sell $7 billion 5 year TIPS notes, on Tuesday $44billion 2 year notes will be auctioned, $41 billion 5 year notes on Wednesday, and...(read more)

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Market Tests Our Lock/Float Strategy; FTHB Tax Credit Getting Bad Press

Victor Burek — Fri, 23 Oct 2009 15:06:00 GMT

Mortgage rates are moving higher this morning as prices of mortgage backed securities have been led lower. To remind readers, as the price of MBS move higher lenders can offer lower mortgage rates and as the price of MBS moves lower, lenders are pressured to offer higher interest rates. The only data to hit news wires this morning was another read on the housing sector. The National Association of Realtors(NAR) released their Existing Home Sales report which totals the number of existing homes, not newly built, in which a sale closed in the prior month. Last month home sales declined after four months of gains, posting a month over month fall of 2.7% to an annualized pace of 5.10 million sales. This report was troubling since mortgage rates have held near historic lows and the government has...(read more)

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Lenders Take Back Yesterday's Rate Sheet Gains

Victor Burek — Thu, 22 Oct 2009 17:29:11 GMT

After opening the day lower yesterday, MBS managed to rally steadily off the lows before a late day stock sell off added steam to the upward price momentum, which resulted in a few lenders repricing for the better by day's end. Several factors contributed to the late day price spike. The findings of the Fed's Beige Book painted an uncertain economic picture, then Wells Fargo was downgraded from 'hold' to 'sell' by a prominent analyst. These two events combined to knock the wind out of the stock market, which resulted in a rally in the benchmark debt and MBS market. Unfortunately the early morning weakness has forced most lenders to take back yesterday's rate sheet gains. Much like yesterday, MBS have opened today much lower, however prices have been steadily moving...(read more)

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Still More Risk than Reward in Floating

Victor Burek — Wed, 21 Oct 2009 16:21:00 GMT

Mortgage rates fell a few basis points yesterday as prices of mortgage backed securities traded near the top of the current range. Helping benchmark yields and MBS prices improve was a weaker than expected read on the housing market and tame inflation data. At the open of trading this morning, MBS have given back all of yesterday’s gains as traders consolidate profits and re-evaluate the market's bias. I speak often of range bound trading. This concept was explained yesterday on the MBS Commentary blog. Check it out. We received more information on the housing sector this morning with the release of the weekly Mortgage Bankers’ Association Application Index . Today's report shows that the recovery progress in the housing market took another turn for the worse last week....(read more)

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Lock at the Price Highs, Float at the Price Lows

Victor Burek — Tue, 20 Oct 2009 14:56:06 GMT

Prices of mortgage backed securities posted modest gains yesterday in an uneventful trading session. Intraday gains didn’t warrant reprices for the better from lenders, however because the rally has carried over into today, mortgage rates are better this morning! This morning we got a read on the health of the housing market with the Housing Starts report. This data totals the number of homes in which new construction has begun. A trend of increasing home construction can help create jobs and increase purchases of goods that go into building a home and furnishing it. Recent reports have shown housing data improving, this month economists were expecting that trend to continue with an annualized pace of 615,000 Housing Starts. However the report came in much lower than expected, posting...(read more)

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Mortgage Rates Take Direction from Fed Speakers

Victor Burek — Mon, 19 Oct 2009 16:41:10 GMT

Last week consumers who were floating loans watched mortgage rates rise almost 0.25% by Friday. After touching five month lows in the previous week, better than expected economic data and corporate earnings reports pressured prices of mortgage backed securities lower which resulted in lender's raising the par 30 year mortgage rate to 4.875% (at best) . To remind readers, as the prices of MBS move lower, lenders offer higher mortgage rates. Today brings little for the markets to digest, however ederal Reserve Chairman Ben Bernanke will be delivering a speech in California. Anytime he speaks, market participants pay attention for any hint at future monetary policy and his economic outlook. His words definitely have the ability to move the markets. Additionally, we are still in the midst of...(read more)

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