Mortgage Rates Steady as Market Looks for Direction
Posted 09-09-2010 at 07:11 AM by VictorBurek
Pretty uneventful day in the markets yesterday. Mortgage rates opened slightly weaker than the prior day. The only economic report, the Beige Book, offered no surprises to the markets. Lack of volatility in the bond market allowed lenders to keep rate sheets unchanged on the day.
Today is the busy day of the week for economic data with two scheduled releases. The Department of Labor released the Weekly Jobless Claims which provides three timely metrics on the health of the labor market.
• Initial Jobless Claims: totals the number of Americans who filed for first time unemployment benefits in the previous week
• Continued Claims: totals the number of Americans who continue to file for benefits due to an inability to find a new job
• Extended and Emergency Benefits: totals the number of Americans who have exhausted their traditional benefits and are now receiving extended and emergency benefits
Since our economy is driven by consumer spending, market participants track employment data to get a gauge on economic momentum. Higher jobless claims imply less consumers have jobs and therefore less money to spend. This is a negative for the overall economy but generally helpful in keeping consumer borrowing costs from rising. Recent reports have shown jobless claims moving higher calling into question our economic recovery.
Here are the results:
• Initial Jobless Claims: -27,000 to 451,000 vs. estimates for a read of 470,000. Prior week’s data was revised worse to show 6,000 more claims. This is the second week in a row of declining initial claims after peaking three weeks ago over 500,000.
• Continued Claims: -2,000 to 4.478 million vs. estimates of 4.45million.
• Extended and Emergency Benefits: +29,300 to 5.47million.
The only other economic report to hit wires this morning was Balance of Goods and Services Trade or as it is commonly known, the International Trade Report. Trade balance data reports the difference between the monetary value of a country's exports and imports. A positive balance, or trade surplus, means exports exceed imports and illustrates that a country's economy is globally competitive. A negative balance of trade is known as a trade deficit or trade gap. The US currently runs a trade deficit.
A globally competitive economy creates more jobs for Americans because U.S. companies must work to satisfy several sources of demand, from domestic and foreign consumers. Greater production translates into faster growth of local economies and a stronger consumer balance sheet, ultimately leading to increased corporate profits and higher stock prices. However, an over dependence on foreign demand for US goods and services implies the domestic economy is vulnerable to foreign economic disruptions.
This report has a two month lag, so today’s data covered July Trade Balance. The report indicated our trade deficit narrowed from $49.9 billion in June to $42.8 in July, better than the expectations of a trade deficit of $47.3 billion. Imports fell 2.1% while exports rose 1.8% to the highest level since August 2008.
The Treasury will conduct their last auction of the week today. At 1pm, they will announce the results of today’s sale of $13 billion 30 year bonds. Yesterday’s 10 year note auction went very well and strong demand for our nation’s debt is one of several factors that have helped to keep mortgage rates at lifetime lows.
The better than expected economic data has resulted in worsened rate sheets this morning. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range for well qualified consumers. The lenders offering 4.125% yesterday are no longer doing so. To secure a par interest rate on a conventional mortgage 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. You may elect to pay less in closing costs but you will have to accept a higher interest rate.
Today is the busy day of the week for economic data with two scheduled releases. The Department of Labor released the Weekly Jobless Claims which provides three timely metrics on the health of the labor market.
• Initial Jobless Claims: totals the number of Americans who filed for first time unemployment benefits in the previous week
• Continued Claims: totals the number of Americans who continue to file for benefits due to an inability to find a new job
• Extended and Emergency Benefits: totals the number of Americans who have exhausted their traditional benefits and are now receiving extended and emergency benefits
Since our economy is driven by consumer spending, market participants track employment data to get a gauge on economic momentum. Higher jobless claims imply less consumers have jobs and therefore less money to spend. This is a negative for the overall economy but generally helpful in keeping consumer borrowing costs from rising. Recent reports have shown jobless claims moving higher calling into question our economic recovery.
Here are the results:
• Initial Jobless Claims: -27,000 to 451,000 vs. estimates for a read of 470,000. Prior week’s data was revised worse to show 6,000 more claims. This is the second week in a row of declining initial claims after peaking three weeks ago over 500,000.
• Continued Claims: -2,000 to 4.478 million vs. estimates of 4.45million.
• Extended and Emergency Benefits: +29,300 to 5.47million.
The only other economic report to hit wires this morning was Balance of Goods and Services Trade or as it is commonly known, the International Trade Report. Trade balance data reports the difference between the monetary value of a country's exports and imports. A positive balance, or trade surplus, means exports exceed imports and illustrates that a country's economy is globally competitive. A negative balance of trade is known as a trade deficit or trade gap. The US currently runs a trade deficit.
A globally competitive economy creates more jobs for Americans because U.S. companies must work to satisfy several sources of demand, from domestic and foreign consumers. Greater production translates into faster growth of local economies and a stronger consumer balance sheet, ultimately leading to increased corporate profits and higher stock prices. However, an over dependence on foreign demand for US goods and services implies the domestic economy is vulnerable to foreign economic disruptions.
This report has a two month lag, so today’s data covered July Trade Balance. The report indicated our trade deficit narrowed from $49.9 billion in June to $42.8 in July, better than the expectations of a trade deficit of $47.3 billion. Imports fell 2.1% while exports rose 1.8% to the highest level since August 2008.
The Treasury will conduct their last auction of the week today. At 1pm, they will announce the results of today’s sale of $13 billion 30 year bonds. Yesterday’s 10 year note auction went very well and strong demand for our nation’s debt is one of several factors that have helped to keep mortgage rates at lifetime lows.
The better than expected economic data has resulted in worsened rate sheets this morning. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range for well qualified consumers. The lenders offering 4.125% yesterday are no longer doing so. To secure a par interest rate on a conventional mortgage 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. You may elect to pay less in closing costs but you will have to accept a higher interest rate.
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Comments
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MBS are moving lower... lenders are about to reprice worse. If locking you better hurry.Posted 09-09-2010 at 12:55 PM by VictorBurek
