Lake Tahoe Home Loan Rates and Lake Tahoe Mortgage Rates:
Thursday’s bond market has opened well in positive territory, erasing losses from afternoon selling yesterday. The stock markets are showing fairly sizable gains with the Dow up 112 points and the Nasdaq up 33 points. The bond market is currently up 22/32, but due to weakness late yesterday we will probably only see an improvement in this morning’s mortgage rates of approximately .125 – .250 of a discount point if comparing to Wednesday’s morning pricing.
This morning’s bond strength is more a result of events late yesterday than it is of this morning’s economic data. Yesterday afternoon had three events that influenced bond trading and mortgage rates. As we headed into closing Wednesday, it appeared that the reaction was negative and many lenders revised pricing higher. However, as the markets closed and Fed Chairman Bernanke spoke at his scheduled engagement, the tone changed direction and it carried into overnight trading.
Yesterday’s 10-year Treasury Note auction didn’t go overly well or noticeably weak. More or less it was an average auction with some indicators pointing towards a decent level of investor interest and others contradicting that. Still, that gives us hope that today’s 30-year Bond auction will not go as bad as some had feared earlier in the week. If investor interest in the sale is high, we should see afternoon strength in bonds that lead to a slight improvement to mortgage rates. On the other hand, a lackluster demand could lead to higher rates later today. Results will be posted at 1:00 PM ET, so any reaction will come during early afternoon hours.
The second item yesterday afternoon was the 2:00 PM ET release of the minutes from the last FOMC meeting. They didn’t give us anything too significant that we didn’t already know. However, there were a couple of tidbits that drew some attention and initially led to weakness in bonds. The most glaring was that apparently nearly half of the FOMC members wish to completely end the Fed’s bond buying program (QE3) by the end of this year. At first glance that put the timetable ahead of the mid-2014 that was referenced in the post-FOMC meeting press conference last month. However, they also indicated further economic growth was needed to support any tapering of the program. In other words, the tapering is based on speculation of further economic growth, which actually isn’t really a surprise. The bottom line is that we didn’t learn anything that we weren’t already told last month, with exception to the growing number of members that preferred to end the progr! am this year.
The final and most beneficial event was Fed Chairman Bernanke’s speech in Boston. His prepared words didn’t cause much of a reaction, but during the Q&A portion of the event he reiterated that the U.S. economy still needs assistance and is benefiting from the Fed’s low interest rates and stimulus. This wasn’t anything surprising, however, just hearing him say it eased some concerns in the markets and helped boost bond prices during overnight and morning trading.
This morning’s only economic news gave us favorable results although the markets have not moved much since the release. The Labor Department announced early this morning that 360,000 new claims for unemployment benefits were filed last week. This was well above expectations of 345,000 and the previous week’s revised total of 344,000 initial claims. That indicates that the employment sector softened last week, making the data good news for the bond market and mortgage rates.
Tomorrow morning has two pieces of relevant economic data scheduled for release. The first is June’s Producer Price Index (PPI) from the Labor Department at 8:30 AM ET. It is a very important release because it measures inflationary pressures at the producer level of the economy. It is expected to show a 0.3% increase in the overall reading and a 0.1% increase in the core data reading. The core reading is the more important of the two because it excludes more volatile food and energy prices, revealing a more reliable inflation reading. The bond market should react favorably if we get weaker than expected readings, but a larger than expected rise in the core reading could send mortgage rates higher.
The final report of the week is the University of Michigan’s Index of Consumer Sentiment. This index is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary reading for July will be posted just before 10:00 AM ET tomorrow and is expected to rise from June’s final reading of 84.1 to 85.0. This would indicate that consumers were a little more comfortable with their own financial situations this month than last month. It is believed that if consumers are confident in their own finances, they are more apt to make large purchases in the near future. And with consumer spending making up over two-thirds of our economy, investors pay close attention to reports such as these. So, a decline in confidence would be good news for mortgage rates because it means many consumers will probably delay making a large purchase in the immediate future, limiting economic activity.