Market Update

Updated on February 21, 2017 10:39:24 AM EST
Tuesday’s bond market has opened in negative territory following the long weekend. Stocks aren’t helping either with the major indexes showing sizable gains. The Dow is currently up 112 points while the Nasdaq has gained 25 points. The bond market is currently down 4/32 (2.43%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point if comparing to Friday’s morning pricing. The financial markets were closed yesterday in observance of the President’s Day holiday.

There is nothing of importance set for release today. The rest of the week doesn’t have much either in terms of economic reports that are likely to affect mortgage rates. There are only three pieces of moderately important data for the bond market to digest along with the minutes from the most recent FOMC meeting and a couple Treasury auctions.

The first piece of data will be January's Existing Home Sales report by the National Association of Realtors at 10:00 AM ET tomorrow morning. This data tracks home resales throughout the country, giving us a measurement of housing sector strength. It is expected to show a rise in sales of existing homes, meaning the housing sector strengthened last month. Ideally, the bond market would like to see a sizable decline in sales because weak housing makes broader economic growth more difficult. Since long-term securities such as mortgage bonds tend to thrive during weaker economic conditions, weak housing numbers would be good news for mortgage rates.

In addition to this week's few economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes tomorrow and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, sales with higher levels of investor demand usually make bonds more attractive to investors and brings additional funds into the bond market. The buying of bonds that follows translates into lower mortgage rates. Results will be posted at 1:00 PM ET, so this will be an afternoon event.

Tomorrow also brings us the release of the minutes from the most recent FOMC meeting. Traders will be looking for any indication of the Fed's next move regarding monetary policy, particularly when the next rate increase may come. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading. These minutes may lead to afternoon volatility, or they may be a non-factor. However, they do carry the potential to influence mortgage rates so they should be watched.

Overall, tomorrow is the best candidate for most active day in mortgage rates but Friday is worth consideration also. The quietest day will probably be Thursday. Generally speaking, there is nothing of major concern scheduled this week. Therefore, we could see a pretty calm week in mortgage rates unless something unexpected happens.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

 ©Mortgage Commentary 2017
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