Financing Homes in Lake Tahoe and Truckee since 1992.

Morning Interest Rate Update-May 29, 2013

Tahoe Mortgage Rates and Tahoe Home Loan Rates:

Wednesday’s bond market has opened in positive territory with stocks showing early losses. The Dow is currently down 83 points while the Nasdaq has lost 15 points. The bond market is currently up 7/32, but this is not enough of an improvement to erase losses from afternoon trading yesterday. Despite the positive open, we will still likely see an increase of .125 – .250 of a discount point in this morning’s mortgage rates if comparing to Tuesday’s morning pricing.

Even with this morning’s gains, the yield on the benchmark 10-year Treasury Note currently stands at 2.14%. That is a long way from the 1.63% we were at on May 2nd. Unfortunately, I don’t see it moving back down to that level anytime in the near future. There is plenty of discussion in the marketplace that the recent spike is overkill and not justified. While I do agree with that theory, I also see little in the near future that is likely to cause yields (and mortgage rates) to reverse course. Unless the major stock indexes go into selling mode and tank significantly, the next item that could do this is May’s Employment report on Friday June 7th. There is some important economic data set for release between now and then, but that date is what we should be looking forward to for potential relief. And we don’t want to think about how bad it will be if that report shows stronger than expected employment numbers.

There is nothing scheduled for release today that is worth watching with exception to the 5-year Treasury Note auction. These types of sales do not directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions in mortgage rates. On the other hand, strong sales usually makes bonds more attractive to investors and brings more funds into the bond market. The buying of bonds that follows usually translates into lower mortgage rates. Tomorrow’s 7-year Note auction is actually closer in term to mortgage-related bonds, however, the first of the two gives us an idea of demand levels and often has the bigger impact than the second. Results will be posted at 1:00 PM ET today and tomorrow, so look for any reaction to come during afternoon hours.

Tomorrow has some relevant economic data scheduled that may influence bond trading and mortgage rates. The first is the weekly unemployment update from the Labor Department at 8:30 AM ET. They are expected to announce that 340,000 new claims for unemployment benefits were filed last week, matching the previous week’s total. The higher the number of new claims, the better the news it is for bonds and mortgage rates because rising claims indicates a weakening employment sector. However, since this is only a weekly report, it takes a wide variance from forecasts for it to have an impact on mortgage pricing.

Also early tomorrow morning, the first revision to the 1st quarter Gross Domestic Product (GDP) will be posted. The second revision to this index comes next month but isn’t expected to carry much importance. The GDP is the sum of all goods and services that are produced in the U.S. and is considered to be the best measurement of economic growth. Last month’s preliminary reading revealed a 2.5% increase in the annual rate of growth. Analysts expect no change in this update. If the revision comes in much stronger than expected, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was stronger than thought last quarter. A much weaker reading could lead to stock selling, a bond rally and lower mortgage rates.