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 benefits due to lack of finding a new job.  Higher than expected claims usually benefits the fixed income sector at the expense of stocks.  If more people are unemployed, less consumer spending is expected, which is bad for corporate profits.  

Today's report indicates 1,000 less people filed for unemployment insurance this week. Initial Jobless Claims fell to 530,000 from last week’s read of 531,000 claims.   Economists surveyed had expected only 525,000 claims, so while improved from the prior week, the data was worse than anticipated.  The continuing claims portion of the report fell almost 150,000 to 5.797million.   The labor market continues to show signs of weakness which will make it hard for our economy to sustain growth since our economy is driven by consumer spending.  Next week, we get the official jobs numbers with the release of the nonfarm payrolls data on Friday. 

The last economic report for the day was the first reading on how our economy did as a whole last quarter, the advance read of Gross Domestic Product.   We get the initial reading today, next month we get the revised reading and the following month we get the final reading.  GDP is the broadest measurement of total economic activity across every sector of our economy.  Basically, it is our economy’s score card. 

The report shows that the domestic economy grew more than expected at 3.5% in the third quarter.  This is the first positive growth in a year.  Much of the expansion is being attributed to government stimulus programs.  The report indicated that consumer spending had increased mainly due to increased purchases of autos thanks to the “cash-for-clunkers” program which has since ended.   Through the prior 12 months, our economy has shrank 3.8% which is the worst performance in 70 years.  Following this report, stocks have moved higher putting pressure on MBS to move lower.

Today at 1pm eastern, the Department of Treasury will hold their final auction of the week, offering $31billion of 7 year notes to the highest bidder.  The two prior auctions this week saw above average demand which has helped MBS move higher in price, resulting in lower mortgage rates.  Benchmark rates are higher ahead of the auction, however we expect the auction to go well which hopefully results in a corrective rally in the MBS market.  Strong demand for our nation’s debt is one of many factors that have helped keep mortgage rates near historic low levels.  Matt and AQ will cover this on the MBS Commentary blog. 

Reports from fellow mortgage professionals indicate lenders rate sheets to be slightly worse than yesterday’s, however the par 30 year conventional rate mortgage in the 4.75% to 5.00% range for well qualified consumers.   To secure a par rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.  If you are seeking a 15 year fixed rate, you should expect a par rate between 4.25% to 4.50% with similar costs and qualifying.