Mortgage Rates End Losing Streak But Treasury Auctions Loom

The week ahead is very light in terms of economic data, that implies we should expect the stock market to continue to provide mortgage rates with directional guidance.  If stocks rally, look for mortgage rates to move higher. If stocks fall, look for mortgage rates to improve. 

The only economic reports on the schedule in the week ahead that have the potential to move mortgage rates will be released on Wednesday and Thursday. 

Tomorrow the Federal Reserve releases the Beige Book, named for the color of its cover.  The Beige Book is a compilation of anecdotal information and data on current economic conditions across the country. The findings are not the views of Federal Reserve officials, instead, each Federal Reserve bank interviews key business contacts, economists, market experts, and other sources in their specific district. This report is published eight times a year and is used at the FOMC meetings where our nation’s monetary policy is set. The market will be reading the Beige Book in search of any signs of economic growth.

Thursday brings us two economic releases: International Trade and Weekly Initial Jobless Claims.  Both could cause some volatility in the market.

HERE is a full recap of the week ahead including consensus estimates.

If you followed my advice on Friday and floated over the weekend, you're in luck. U.S. stock markets lost the gains they enjoyed on Friday. This led benchmark Treasury yields lower and pushed mortgage-backed securities prices higher. The increases seen in consumer borrowing costs on Friday have been fully recovered after lenders repriced for the better today. THIS POST explains what motivated equity markets to sell off in the overnight session.

The par 30 year fixed conventional mortgage rate remains in the 4.25% to 4.50% range with several lenders offering 4.125% again, but not all.   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 the closing costs including an estimated one point loan origination/discount/broker fee.  For consumers with lower FICO scores or higher loan to values, you should consider an FHA loan which offers similar rates but with higher costs.

Besides the ups and downs in stock market, mortgage rates will also be motivated by Treasury auctions in the week ahead. Tomorrow the Treasury will auction 10 year notes. On Thursday they will auction 30 year bonds. With the econ calendar basically empty, we feel these government fundraisers will pressure mortgage rates higher in the next two days. If you are within 15 days of closing, you should be locking to take advantage of the improved rate sheets we are seeing today.  Longer term closings should also consider locking but if you want to gamble keep an eye on the stock market.