Mortgage Rates Show Slight Improvement

Mortgage rates improved slightly today, bringing them close to the lowest levels we saw earlier this week. So what kind of numbers are we talking about here?  The changes have been too small to mention.  Almost any scenario would be quoted the same rate today as any other day this week.  The only noticeable change would be in the upfront costs (or credits) associated with the rate. 

This week some banks reported earnings and profits that were better thought in Q1, they did not do it with profitable businesses, they did it by cutting costs and firing huge numbers of employees. This afternoon Intel is talking about cutting a lot of jobs between now and the end of year blaming a slowing in PC sales. Treasury sold a total of $56B of 3s, 10s and 30s - everyone met with very strong demand, especially the 10yr and 30yr auctions. March industrial production this morning down with forecasts of unchanged from February.  March capacity utilization also fell and February revision was even worst.

Next week, on Monday markets will be reacting to the IMF/World Bank meetings over the weekend. Right at the beginning at 7:30 Monday NY Fed Pres. Wm. Dudley with the NAHB housing market index that same day. Tuesday March housing starts and permits. Wednesday March existing home sales, Thursday April Philly Fed business outlook Index, March leading indicators. Friday the Flash PMI manufacturing index. No Treasury borrowing next week. Generally, tin on domestic economic data, the existing home sales on Wednesday the main event next week. Crude oil of course drives most US and global markets, how the weekend meeting goes will drive the price and in turn influence the equity and bond markets.

Should you lock?  Sure!  Rates are near three-year lows, have you not heard me say this once or twice this week?  Moreover, we have definitely encountered some stickiness in moving any lower from here.  What about floating?  There's a place for that strategy as well, as long as you understand the risk that markets could move against you and you're prepared to lock at a higher rate if markets move too much.  In general, floating is still riskier now if you are closing in less than 30 days than it was a few weeks ago when rates were clearly in a downtrend. 

In summary, bond markets showed some strength today, ending with slight gains.  The move was hardly decisive, and it remains to be seen where we go from here.  If stock earnings beat expectations, bonds may lose their "risk off" appeal, taking rates upward.  I am still stating if you are less than 30 days from closing, lock it now.  We will need decidedly weak economic data to take us much lower, the bigger question is where we will move if data meets expectations.  Floaters, be ready to lock, do not presume rates only go down.