Friday’s bond market has opened in positive territory, extending yesterday’s afternoon rally. Stocks are showing sizable losses with the Dow down 207 points and the Nasdaq down 33 points. The bond market is currently up 10/32 (2.15%), which should improve this morning’s mortgage rates by another .125 of a discount point from yesterday’s late improvement.
Bonds rallied after yesterday afternoon’s FOMC events, causing widespread lender improvements to mortgage rates. We saw downward adjustments in the range of .375 – .500 of a discount point yesterday. This morning’s gains have added another .125 improvement, meaning fixed rates should have moved lower by .125 of a percent in rate. The move was beneficial to mortgage shoppers, but I believe it is time to remain cautious towards rate movement. There is room for bonds and mortgage rates to move a little lower in the near term. However, it is quite possible that the benchmark 10-year Treasury Note yield could jump back to the 2.22 – 2.25% range. Since mortgage rates tend to follow bond yields, this would be bad news for mortgage borrowers. Therefore, please proceed cautiously if still floating an interest rate and closing soon. It may be a good opportunity to capture the dip in rates.
Today’s only economic report was August’s Leading Economic Indicators (LEI) at 10:00 AM ET this morning. It showed a 0.1% increase, meaning the indictors are predicting modest economic growth over the next couple months. Analysts were expecting to see a 0.2% increase, so we can technically consider this good news for bonds. However, the truth is that this data is not important enough to have much of an impact on this morning’s trading following yesterday’s key events.
Next week is moderately busy in terms of economic reports scheduled for release that are likely to affect mortgage rates. There are also a couple of Treasury auctions that may influence afternoon trading two days. Monday does have a piece of data for us to watch with the release of August’s Existing Home Sales. Look for details on it and the rest of the week’s activities in Sunday evening’s weekly preview.