A steady rally in benchmark Treasury yields yesterday helped prices of mortgage backed securities move to five month highs which allowed lenders to keep mortgage rates near five month lows. The major event that took place in the rates market yesterday was the Treasury auction of $20 billion in 10 year notes. Demand from investors was very strong which contributed strength to the move higher in MBS prices. Since the price gains were consistent into the close, a few lenders did reprice for the better.   

Weekly jobless claims data was released this morning.  This data totals the number of Americans that filed for first time unemployment benefits in the prior week.  Last week’s report showed first time claims unexpectedly rose by 17,000 from the prior week, breaking a streak of continued improvements in the jobs market.  The U.S. Department of Labor reports that for the week ending October 3, first time claims fell by 33,000 to 521,000 from a revised 554,000 the previous week. This beat economists’ expectations for 540,000 claims and is the lowest number of weekly claims in 10 months!  Continuing claims, which totals the number of Americans that continue to file for unemployment benefits due an inability to obtain a new job, also improved...moving lower by 72,000 to 6.040 million.   Despite this much better than expected economic data, MBS continue to hold near the highest levels we have seen this year. AQ says this is a function of yesterday's rally in the bond market. Many market participants were buying benchmark Treasuries at a yield of 3.21% yesterday afternoon. This put a floor, or a level of support, in the rates market today.

At 1pm eastern, the U.S. Department of Treasury will conduct its final auction of the week...offering $12 billion 30 year bonds.  Strong demand for our nation’s debt has help keep mortgage rates near historic lows.    As always with auctions, the added supply of debt on the market can pressure both treasury and MBS prices to move lower.  However, if demand is strong at the auction, prices can move higher which can lower mortgage rates.  Matt and AQ will cover the auction results on the MBS Commentary blog. 

For more on the day ahead, read the MND STORY.

Reports from fellow mortgage professionals indicate that the par 30 year conventional rate mortgage is holding in the 4.625% to 4.875% range for the best qualified consumers.  To secure a par rate you must have a FICO credit score of 740 or higher, a loan to value 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.   A few lenders are offering incentives for consumers with FICO scores above 750 and loan to values under 60% which will lower the rate to 4.5%.