Over the past few weeks, with strength in stocks, and economic reports showing either lower than expected losses or better than expected gains, the market has been operating under the impression that we could slowly pull up from our recessionary nose dive. Today's today refutes that stance and is helping Mortgage Backed Securities (MBS - the bonds that directly govern mortgage rates) to find more buyers. Thus, rates are improving. In fact, we're almost back to where we were a few weeks ago.
Manufacturing data was weak this morning although the Philly Fed Survey was a bit less weak than expected. Additionally, Jobless claims continue to be very high. If it weren't for several Dow components keeping the DJIA afloat, we would see even better gains in mortgage pricing on this news.
What usually happens though is that traders will have to accept the negative data by the end of the day. Also, because of the speed of the improvements, lenders will be hesitant to "give" us all of the price improvements they have realized this morning on MBS. So floating makes sense this morning even if the offered rates look tempting. We should be seeing more improvements in the days and weeks to come.
The one thing to watch is the Dow Jones average. If it is able to rally and rise today and in the coming days, it is an indication that the markets have "shrugged off" the negative data. This will lead traders to pull money out of the bond market which can freeze our rate improvements and negate our recommendation to float. So if you will float, you must keep a diligent eye on the bond markets and check back here (especially on the professional section of the blog) for intra-day updates.
Until then, enjoy this morning's improved rates and cross your fingers for more improvement soon!