Rates Holding Steady as a Light Data Week Begins
Posted 11-09-2009 at 08:04 AM by VictorBurek
On Friday, the prices of mortgage backed securities closed at their highest levels seen over the last few weeks. To remind readers, as the prices of MBS move higher, lenders are able to pass along lower mortgage rates. Much of the data from last week was fairly positive for the economy which usually does not bode well for the fixed income sector; however, MBS managed a slow but steady march higher. The highest impacting report, the Employment Situation, did post worse than expected numbers which helped to push MBS to the highs of the week.
Also on Friday, President Obama signed an extension of the $8000 First Time Home Buyer tax credit through April 30th of 2010. The tax credit is also being offered to homeowners who have lived in their current home for at least five years and are seeking to relocate giving them up to a $6500 credit. The income limits have also been increased from $75,000 for a single person to $125,000 and from $125,000 to $225,000 for a married couple.
The week ahead is very light on economic data. Of most significance to mortgage rates will be the Treasury auctions. Today at 1pm eastern, the U.S. Department of Treasury will auction $40billion of 3 year notes, followed by $25billion of 10 year notes on Tuesday and wrapping up with $16billion on Thursday. As always with Treasury auctions, the added supply of debt on the markets will pressure treasuries lower in price, higher in yield to attract buyers. Since the supply is already known, market participants track the demand to gauge the success of the auctions. Strong demand for our nation’s debt is one of the many factors that have attributed to record low mortgage rates.
The fixed income markets will be closed on Wednesday in honor of our Veterans. On Thursday we get the weekly jobless numbers followed up with Consumer Sentiment on Friday. Additionally, we have a few speeches this week from various Fed officials. Anytime Fed officials speak, market participants pay attention for any hint of future monetary policy and their outlook on the economy.
Early reports from fellow mortgage professionals indicate the par 30 year conventional rate mortgage is holding 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.
I have been using a well defined trading range to gauge my lock/float recommendations. The idea is to lock at the price highs and float at the price lows. Well, MBS are holding near the top side of the trading range so I am going to recommend cautiously floating. We have a very light week for economic reports and with the recent rise of treasury yields the auctions this week could see strong demand which might just push MBS through the top of the range.
Also on Friday, President Obama signed an extension of the $8000 First Time Home Buyer tax credit through April 30th of 2010. The tax credit is also being offered to homeowners who have lived in their current home for at least five years and are seeking to relocate giving them up to a $6500 credit. The income limits have also been increased from $75,000 for a single person to $125,000 and from $125,000 to $225,000 for a married couple.
The week ahead is very light on economic data. Of most significance to mortgage rates will be the Treasury auctions. Today at 1pm eastern, the U.S. Department of Treasury will auction $40billion of 3 year notes, followed by $25billion of 10 year notes on Tuesday and wrapping up with $16billion on Thursday. As always with Treasury auctions, the added supply of debt on the markets will pressure treasuries lower in price, higher in yield to attract buyers. Since the supply is already known, market participants track the demand to gauge the success of the auctions. Strong demand for our nation’s debt is one of the many factors that have attributed to record low mortgage rates.
The fixed income markets will be closed on Wednesday in honor of our Veterans. On Thursday we get the weekly jobless numbers followed up with Consumer Sentiment on Friday. Additionally, we have a few speeches this week from various Fed officials. Anytime Fed officials speak, market participants pay attention for any hint of future monetary policy and their outlook on the economy.
Early reports from fellow mortgage professionals indicate the par 30 year conventional rate mortgage is holding 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.
I have been using a well defined trading range to gauge my lock/float recommendations. The idea is to lock at the price highs and float at the price lows. Well, MBS are holding near the top side of the trading range so I am going to recommend cautiously floating. We have a very light week for economic reports and with the recent rise of treasury yields the auctions this week could see strong demand which might just push MBS through the top of the range.
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