Another Good Day For Mortgage Rates 12-28-2017

By James Brooks

The bond market is down 1/32 (2.43%), but we still should see an improvement in Raleigh area mortgage rates of approximately .125 of a discount point due to strength yesterday that picked up momentum as the day progressed.

Yesterday’s 5-year Treasury Note auction did not go poorly but hardly can be considered strong. Most of the benchmarks we use to gauge investor demand showed an average level of interest in the securities. It is safe to say that this auction was not the cause of yesterday’s afternoon improvement in bond prices and mortgage rates. Bonds had already improved from morning levels before the results were posted.

Last week’s unemployment figures were posted at 8:30 AM ET this morning, revealing 245,000 new claims for benefits. This matched the previous week’s total but was higher than the 238,000 initial filings that was forecasted. Since rising claims indicates employment sector weakness, the higher than thought number of claims is good news for bonds and mortgage pricing. However, because this is only a weekly snapshot, it does not carry much importance unless its results vary greatly from expectations. Accordingly, we are seeing the news have little impact on today’s trading or mortgage rates.

There is also a 7-year Treasury Note auction today that has the potential to influence mortgage rates if it shows an overly strong or weak demand from investors. There are four regular Treasury auctions that we follow as they have the greatest chance of affecting mortgage rates. This week had the two less important sales of the four. The 10-year Note and 30-year Bond auctions usually affect mortgage rates more than the 5 and 7-year Note sales do. So, it will not be surprising if we don’t see much of a reaction to today’s sale. A strong demand for the securities is good news for the broader bond market while a weak interest could cause a slight upward revision to mortgage pricing this afternoon. Results will be posted at 1:00 PM ET, meaning if there is a reaction, it will come during early afternoon trading.

Tomorrow has nothing of importance set for release. It is a full trading for stocks but a shortened day for bonds. The bond market is expected to close at 2:00 PM tomorrow while all markets will be closed Monday for the New Year’s Day holiday. It is fairly common to see some pressure in the bond market before holidays as investors sell holdings to protect themselves over the extended weekend. This scenario usually has only a minor influence on mortgage rates though.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now.

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