Financing Homes in Lake Tahoe and Truckee since 1992.

Morning Interest Rate Update-May 30, 2013

Tahoe Mortgage Rates and Tahoe Home Loan Rates:

Thursday’s bond market has opened relatively flat despite the release of some favorable economic news. The stock markets are showing early gains with the Dow up 78 points and the Nasdaq up 22 points. The bond market is nearly unchanged from yesterday’s close, but we should still see an improvement in this morning’s mortgage rates of approximately .250 – .375 of a discount point due to a rally during late afternoon trading Wednesday.

There were two pieces of economic data posted early this morning. The Labor Department announced that 354,000 new claims for unemployment benefits were filed last week, up from the previous week’s 344,000. Analysts were expecting to see no change in the number of initial claims filed, so we can consider this data good news for the bond market and mortgage since it hints at a weaker employment sector than many had thought. However, with the report tracking only a single week’s worth of new claims, its impact on today’s mortgage rates has been fairly minimal.

The second report of the morning was the first revision to the 1st quarter Gross Domestic Product (GDP). It came in with a 2.4% annual rate of growth, falling just shy of analysts’ forecasts and the previous estimate of 2.5%. This indicates that the economy grew at a slightly slower pace during the first three months of the year than previously thought. That is technically good news for the bond market and rates, although it was not enough of a change to cause much concern or joy in the markets. Accordingly, it has also had little influence on today’s mortgage pricing.

Also today is the 7-year Treasury Note auction that has the potential to affect bond trading and possibly mortgage rates. Yesterday’s 5-year Note sale went relatively well with several indicators pointing towards a respectable level of investor demand. Not overly strong or weak. That eases some concerns about today’s auction. The bond market did improve after results of the 5-year Note sale were posted yesterday, so as long as we don’t see a weak interest in today’s auction, we could get further improvements to mortgage rates after results are released at 1:00 PM ET.

Tomorrow also has two pieces of relevant economic data, both of which have the potential to move mortgage rates. April’s Personal Income and Outlays data is the first at 8:30 AM ET. It gives us an indication of consumer ability to spend and current spending habits. An increase in income means that consumers have more money available to spend. Since consumer spending makes up over two-thirds of our economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.1% increase in income and a 0.1% rise in spending. Weaker readings would be considered good news for bonds and mortgage rates.

The last relevant data of the week will come from the University of Michigan, who will update their Index of Consumer Sentiment for May just before 10:00 AM ET tomorrow. This type of data is watched closely because when consumers are feeling more confident about their own financial situations, they are more likely to make a large purchase in the near future. Rising confidence and the higher levels of spending that usually follow are considered negative news for bonds and mortgage rates. Tomorrow’s report is expected to show no change from this month’s preliminary reading of 83.7, but it is worth reminding ourselves of the similar CCI from Tuesday that showed a spike in confidence. A higher reading would be considered negative for bonds and mortgage pricing.