Financing Homes in Lake Tahoe and Truckee since 1992.

Lake Tahoe Mortgage Rate Trends- January 6, 2015

Tuesday’s bond market has opened in positive territory despite a partial recovery of yesterday’s significant stock sell-off that pushed the Dow lower by 331 points. The major stock indexes are showing moderate gains with the Dow up 74 points and the Nasdaq up 7 points. The bond market is currently up 14/32 (1.98%), which should improve this morning’s mortgage rates by approximately .250 of a discount point.

This morning’s break below 2.00% for the benchmark 10-year Treasury Note yield is a significant point worth watching. That has been a strong level of resistance, so we need to be prepared for a move back above it almost immediately. Since mortgage rates tend to follow bond yields, such a move would be bad news for mortgage shoppers. However, if we are able to remain below that level past this week’s reports, we could be in for a noticeable move lower in both yields and mortgage rates. Unfortunately, unless Friday’s major economic news is extremely favorable for the bond market, I believe it will be difficult for the 10-year yield to stay below 2.00% at this time. And I think it will be particularly difficult if stocks move higher.

The Commerce Department gave us November’s Factory Orders report at 10:00 AM ET this morning. They announced a decline of 0.7% in new orders at U.S. factories. That was weaker than expected, indicating the manufacturing sector was a bit softer than many had thought. Because bonds tend to thrive in weaker economic conditions, we can consider the data slightly favorable for the bond and mortgage markets.

Tomorrow morning has one piece of relevant economic data scheduled for release. That would be the ADP Employment report at 8:15 AM ET tomorrow. This release has the potential to cause movement in the markets if it shows much stronger or weaker numbers. It tracks changes in private-sector jobs of the company’s clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not very accurate in predicting results of the monthly government report that follows a couple days later. Still, because we sometimes see a noticeable reaction to the report, it is on our calendar. Forecasts are calling for an increase of 232,000 new payrolls. Good news for mortgage rates would be a much smaller increase in payrolls.

Also tomorrow is the release of the minutes from the last FOMC meeting. They will give market participants insight to the Fed’s thinking and concerns regarding the economy, inflation and monetary policy. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they won’t affect the markets or mortgage rates until afternoon hours. I don’t suspect this particular set of minutes will cause too much concern or excitement because the last FOMC meeting was followed by revised Fed forecasts and a press conference by Chairperson Yellen. Still, analysts will be looking for any tidbits that could help predict when the first short-term interest rate increase will be made.