Last week mortgage rates were up, then they were down, then they were up again, then on Friday they finally moved under 5% again. Following a successful auction of 7 year notes on Thursday and weaker than expected economic data on Friday many lenders repriced for the better...bringing mortgage rates barely below 5.00%.  However, in what has become a consistent pattern lately, each time rates break the 5% barrier they do not remain there very long., and guess far this morning, that trend looks to be continuing. 

Last night,  manfucturing data came in better than expected for the Eurozone and China sparking a global rally in stocks which applied pressure on Treasuries and mortgage backed securities to move lower in price.  To remind readers, when MBS and treasuries move lower in price, yields (interest rates) move higher.

We do have some economic data this morning which will dictate the flow of investor money for the rest of the day.  First out this morning is the Institute of Supply Management’s Manufacturing index which measures the strength of manufacturing by surveying more than 300 manufacturers across the U.S.   Each of the last four readings of this survey has indicated an easing of the current recession which is helping to spark the green shoots theory of a quick economic recovery.  This sentiment has helped the stock market to move considerably higher over the last couple months.    The report has indicated that manufacturing continues to improve coming in at  48.9 beating estimates of 46.5.  This better than expected data will provide further support to the green shoots theory and will continue to pressure MBS to move lower. READ MORE

Also out this morning is the monthly Construction Spending report which shows the month over month change to the dollar value of new construction activity on residential, non-residential and public projects.  Last month’s report showed construction spending declining 0.9% after gaining 0.6% in April.  Expectations for June was for further weakness with a decline of 0.5%.  An increasing trend on construction spending would lead to more construction jobs and increased spending, both positive news for economic growth.  When a home or office is built there are many things that must be purchased to complete the project.  So, when construction spending is increasing, we usually see the stock market rally.  The actual report has indicated that construction spending increased last month by 0.3% beating estimates of further declines.   This report will also pressure MBS to move lower. READ MORE

For a look at what will move investor money for the rest of the week, Week Ahead.  The highest impacting events this week will be the Treasury announcement on Wednesday of the size of the upcoming auction next week of 3 year notes, 10 year notes and 30 year bonds and the Employment Situation report on Friday.  This report is the single most influential economic report released on a monthly basis. 

Early reports from fellow mortgage professionals are indicating that the par 30 year conventional rate mortgage is in the 5.000% to 5.250% range for the best qualified consumers.  Early weakness with MBS has resulted in lenders reissuing new rate sheets.  The strength in equities is resulting in market participants selling their low yielding, safe fixed income investments in favor of  stocks.   

We alerted readers on Friday to take advantage of the improved rate sheets and lock your loans.  If you did, good for you and well played.  If you still floating, you might want to contact your mortgage professional this morning and get your rate locked.  It appears the recent trend of rates being below 5% for a brief time is going to continue.