After two dataless days and no movement in mortgage rates, action picked up yesterday. Mortgage rates opened the day lower, however, thanks to big turnout at the 10 year Treasury note auction, enchmark yields rallied and mortgage-backed security prices moved higher into the close. We sat and waited for lenders to reprice, disappointingly they never did.  This isn't a surprise though, lenders are quick to take away rate sheet pricing when MBS prices are falling but really slow to pass along improvements when MBS prices are on the rise.  

We had a couple of scheduled economic reports that were released early enough to sway the direction of mortgage rates today.

First we got Weekly Jobless Claims from the Department of Labor.  This report provides three measures on the health of the labor market:

1. Initial Jobless Claims:  totals the number of Americans who filed for first time unemployment benefits
2. Continued Claims:  totals the number of Americans who continue to file for benefits due to an inability to find a new job
3. Extended Benefits:  totals the number of Americans who have exhausted their traditional benefits and are now receiving emergency benefits

Since our economy is driven by consumer spending, market participants track employment data to get a sense of economic momentum.  While an increase in jobless claims is a bad sign for the economy, weak data generally helps mortgage rates move lower.  Higher rates of unemployment reduce income levels and strain consumer spending.  Less spending erodes corporate profits and forces investors to sell stocks.  When investors sell stocks they usually look to re-allocate funds into safer assets like U.S Treasuries.  When Treasury yields fall mortgage rates usually follow their lead.  As a general rule, bad news for the economy is good news for mortgage rates. 

Last week’s claims numbers came in "on the screws" (as expected) following the previous week’s much worse than expected results.  This week’s report came in as expected at 462,000 New Jobless Claims, a decline of 6,000 from the prior week.   Continued claims increased by 37,000 to 4.56 million while the number of Americans receiving extended benefits declined by 174,830 to 5.69million. 

Yesterday, the Senate approved a bill to once again extend benefits even further to as many as 99 weeks.  The House takes up the bill next before it can be passed along to President Obama to make it law. 

Released at the same time was the International Trade data.   The Trade Balance report measures the monthly difference between what our nation imports and what our nation exports. The report showed that our trade deficit narrowed much more than expected in January to -$37.3 billion from a revised $39.9billion deficit in December.   Exports declined 0.3% while imports fell 1.7% indicating weaker demand here for foreign products.  The largest decline with imported items was seen in oil as we imported the fewest barrels in a decade.   The decline in exports was the first decline since last April ending a streak of 8 months in a row of gains.

At 1pm eastern, the Department of Treasury released the results of today’s $13 billion 30 year bond auction. Just like the previous two auctions of the week, demand for our nation's debt was strong. Prior to the auction, benchmark yields were rising and MBS prices were falling. The strong auction turnout helped reverse selling and allowed both 10 year yields and the FN 4.5 MBS coupon to return to flat on the day. AQ covered the results oon the MBS Commentary blog. 

Reports from fellow mortgage professionals indicate lender rate sheets to be at most just slightly worse than yesterday, they are really unchanged for the most part.  The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers.  To secure a par interest 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.  You may elect to pay less in fees but you will have to accept a higher interest rate.  If you are seeking a 15 year term, you should expect par in the 4.25% to 4.50% range with similar costs but lower FICO score requirement. 

Mortgage rates made it passed three Treasury auctions basically unchanged!

Tomorrow morning we get the Retail Sales, Consumer Sentiment and Business Inventories.  Of the three, the Retail Sales report has the highest potential to move the markets. Better than expected results would move rates higher while worse than expected results would only improve mortgage borrowing costs by a few basis points. I continue to advise my clients and readers to lock as rates continue to hold at the best levels of the year and market participants show no willingness to drive mortgage rates lower.  Same exception as yesterday, if you can float overnight and lock on a shorter term tomorrow, I would float.