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Thursday’s bond market has opened in negative territory again as yesterday afternoon’s Fed events continues to affect this morning’s trading. The stock markets are giving back just a little of yesterday’s Fed-fueled gains with the Dow down 24 points and the Nasdaq down 12 points. The bond market is currently down 13/32 (2.93%), which will push this morning’s mortgage rates higher. After we updated this report yesterday afternoon, the bond and mortgage markets weakened just before close, causing some lenders to revise rates higher. How much of an increase in this morning’s pricing will depend if your lender revised higher late in the day and how much of a revision was made. Overall, this morning’s rates should be approximately .375 – .500 of a discount point higher than Wednesday’s morning pricing.
There were three pieces of economic data posted this morning, but none were considered highly important to the markets or labeled as key data. The first came at 8:30 AM ET when the Labor Department posted last week’s unemployment figures. They announced that 379,000 new claims for unemployment benefits were filed last week. This was moderately higher than the revised 369,000 of the previous week. However, analysts were expecting to see a sizable decline in initial claims last week, not an increase. That indicates the employment sector was weaker last week than many had thought, making the data good news for the bond market and mortgage rates. Unfortunately, this is just a weekly report and traders are still reacting to yesterday’s news. Therefore, this data has not had much of an impact on this morning’s mortgage rates.
The National Association of Realtors gave us November’s Existing Home Sales report at 10:00 AM ET. They announced that sales of previously owned homes fell 4.3% last month, nearly doubling the decline that was expected. It was the third consecutive monthly decline and the lowest level since December of last year, pointing towards a softening housing sector. That is also good news for the bond and mortgage markets, but not good enough to offset this morning’s early selling.
Today’s third and final economic report was November’s Leading Economic Indicators (LEI) from the Conference Board at 10:00 AM. It showed a 0.8% increase in the indicators, meaning it is predicting a moderate rate of economic growth over the next several months. Forecasts were calling for a 0.6% increase. Fortunately, this data falls into the same situation as this morning’s other reports. It isn’t important enough to draw focus away from the Fed’s tapering decision yesterday.
We also have the 7-year Treasury Note auction to watch later today. Results of the sale will be posted at 1:00 PM ET, so any reaction to it will come during early afternoon trading. Yesterday’s 5-year Note sale did not go well at all, so we don’t have much to be optimistic about in today’s auction. Generally speaking, a strong level of investor demand could help boost bond prices and possibly lead to a small improvement in mortgage rates. However, another weak level of interest could cause this morning’s bond losses to be extended and a potential upward revision to rates would exist.
Tomorrow has one relevant economic report scheduled for release. It is the second and final revision to the 3rd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. I don’t think this data will have an impact on mortgage rates unless it varies greatly from its expected reading. Last month’s first revision showed that the economy expanded at a 3.6% annual pace during the quarter and this month’s final revision is expected to show no change from that level. A revision higher than the 3.6% rate that is expected would be considered bad news for bonds. But since this data is quite aged at this point and 4th quarter numbers will be posted next month, I don’t think it will have much of an impact on mortgage rates.