Lake Tahoe Mortgage Rates and Lake Tahoe Home Loan Rates:
Tuesday’s bond market has opened in negative territory following mixed economic news and a positive open in stocks. The stock markets are showing moderate gains during early trading with the Dow up 77 points and the Nasdaq up 21 points. The bond market is currently down 7/32, which would have pushed this morning’s mortgage rates higher by approximately .125 of a discount point. However, afternoon weakness in bonds yesterday caused many lenders to revise their rates higher by approximately .250 of a discount point. This means that this morning’s pricing will likely be in the range of .250 – .375 of a discount point higher than yesterday’s morning rates.
The Labor Department gave us one of this morning’s two economic reports. They announced that May’s Consumer Price Index (CPI) rose 0.1% and the core data rose 0.2%. The overall reading was slightly below forecasts but the core data was slightly higher than what was expected (0.2% and 0.1%). The weaker overall reading means inflationary pressures were just a bit stronger at the consumer level of the economy than many had thought, making that good news for bonds. Unfortunately, the core reading is more important to analysts because it excludes more volatile food and energy prices. With it coming in higher than expected, we should consider the report neutral to slightly negative for bonds and mortgage pricing. Although, the data does indicate inflation remained subdued last month and is not currently a threat to the overall economy.
May’s Housing Starts was also posted this morning, revealing a 6.8% increase in the number of new housing construction projects that broke ground. That is a sign of housing sector growth, but the increase was well below the 11% jump that analysts were expecting to see. In other words, the report does indicate growth in the housing sector, but at a much slower pace than analysts were thinking. So, we can consider the data fairly favorable for mortgage rates.
Yesterday’s afternoon weakness in bonds and pressure on mortgage rates has become all too familiar. It seems that even if we get really good news that causes morning strength in bonds, it is lost to afternoon selling and intra-day revisions to mortgage rates. What made yesterday particularly frustrating was the fact that bonds weakened as stock fell from their highs of the day, which is opposite of what we would expect to see. Generally speaking, this afternoon selling days are nearly impossible to predict because there is no cause or logic to foresee. It is relatively common to see afternoon movement in bond trading and mortgage rates, however, under normal circumstances the revisions are sometimes upward and sometimes they lead to lower mortgage rates. Unfortunately, we are seeing many, many more days of afternoon weakness and higher mortgage pricing recently than improvements. With the major events on tomorrow’s calendar, there is no reason to believe we will be sheltered from a repeat performance this afternoon also.
Tomorrow has no important economic data scheduled for release, but we do have three Fed events that are likely to cause plenty of volatility in the financial and mortgage markets. The first is the 12:30 PM adjournment of the FOMC meeting that actually started today. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting, but there is a great deal of speculation that they will address or clarify their intentions on tapering their current bond-buying program (QE3). The post-meeting statement may or may not answer some of the questions that analysts and traders have. If it does, look for an immediate reaction in the financial and mortgage markets.
At 2:00 PM ET tomorrow, the Fed will release their updated estimates for future economic growth. They will likely post their predictions on GDP growth, unemployment and inflation. These could be a market mover if they show even minor revisions to any of the key headline economic numbers. The larger the change, the more likely the markets will react. Revisions that point toward slower economic growth would be good news for the bond market and mortgage rates.
The FOMC meeting is ending earlier than the traditional 2:15 PM because it is one of them that will be followed by a press conference hosted by Fed Chairman Bernanke. The meeting will adjourn at 12:30 PM while the press conference will begin at 2:15 PM and will probably lead to significant afternoon volatility in the markets and mortgage rates. The key topics will probably be unemployment, QE3 and what change the Fed expects to make and when it will likely happen. There is a very high likelihood of seeing a great deal of volatility in the markets and also mortgage rates tomorrow afternoon. Therefore, please proceed cautiously if floating an interest rate.