Bonds Pressured Lower
Mortgage Bonds continued their downward spiral with prices lower for the sixth trading day out of the last seven as investors took the opportunity to take profits. Stock markets rose as cash moved from Bonds into stocks as the Dow rose 47.53 to 10,462.77, the S&P gained 5.37 to 1,109.55, the Nasdaq was higher by 6.28 to 2,242.48. Bonds are now below support at both the 25 and 50-day Moving Averages. Our Alert to Lock yesterday was insightful and protected those of you who moved quickly. We maintain our bias toward locking rates and we will see if bonds can manage a come back. Recent better than expected economic reports, disappointing Bond Auction results along with St. Louis Federal Reserve Bank President, James Bullard changing his tune, predicting a pickup in the economy for 2011, are a few of the reasons for the deterioration in Bond prices.
Mortgage Applications Increase as Interest Rates Rise
Typically, as rates rise, many who procrastinated or were wondering if we were at the bottom will now make their move and as they do, lenders pipelines will back up even more. Therefore, you should consider locking into a 90 day interest rate. The additional cost will be well worth it, as lenders will have difficulty approving and closing loans within the typical 45-60 day time frames.
Jobs, Jobs, Jobs
Initial Jobless Claims came in at 451,000, better than the 470,000 expected. This was the lowest number since July 9th. This mildly positive report adds to the improving trend since the recent peak at 504,000, hit a few weeks ago. Emergency Unemployment Compensation (EUC) benefits claims decreased by 35,000, but is still very high at 4.5M. Reducing unemployment is key in restoring the real estate market and the economy.
Fannie Mae 3.5% Coupon Bond $99.03 -84bp