Mortgage Newsletter- October 8th, 2012 Dana Bain Premiere Mortgage 978-422-2311

By
Mortgage and Lending with Premiere Mortgage Services Inc. MLO 18693

http://www.bainmortgage.com/MortgageMarketWeekInReview

Newsletter-October 8th, 2012
Provided by
Dana Bain & Robin Dunbar Bain

Dana Bain
Premiere Mortgage Services

www.BainMortgage.com

11 Malvern Hill Road
Sterling, MA 01564
Phone: (978) 422-2311
Fax: (978) 422-2313
E-Mail: dana@bainmortgage.com

 
 
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Market Comment

Mortgage bond prices finished the week lower which pushed rates higher. Rates were quiet throughout the first portion of the week as euro zone weakness dominated the headlines. Stronger than expected data the latter portion of the week caused a spike in rates. Higher than expected ISM Index data started the negative trend. The biggest rate increases came Friday morning following the employment report. Unemployment came in at 7.8%, considerably lower than the expected 8.2% mark. This shocked the financial markets. Stocks extended their gains and mortgage bond prices fell which pushed rates higher. Mortgage interest rates finished the week worse by about 5/8 of a discount point as a result.

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

3-year Treasury Note Auction

Tuesday, Oct. 9,
1:15 pm, et

None

Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction

Wednesday, Oct. 10,
1:15 pm, et

None

Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Fed “Beige Book”

Wednesday, Oct. 10,
2:00 pm, et

None

Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
Weekly Jobless Claims

Thursday, Oct. 11,
8:30 am, et

362k Important. An indication of employment. Higher claims may result in lower rates.
Trade Data

Thursday, Oct. 11,
8:30 am, et

$43.5b deficit

Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
30-year Treasury Bond Auction

Thursday, Oct. 11,
1:15 pm, et

None

Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Producer Price Index Friday, Oct. 12,
8:30 am, et
Up 0.9%,
Core up 0.2%
Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Oct. 12,
10:00 am, et
76.8 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Stocks and Bonds Remain Volatile

Last week, mortgage interest rates rose sharply following the lower than expected unemployment figure. As the US economy moves along and world economies struggle, the demand for the lower yielding government-backed debt securities has whipsawed considerably. One day we see a flight to quality influx of investor funds, which drive prices up and rates down. The next day the inverse occurs.

The US stock market was on a roar the latter portion of the week at the expense of demand for mortgage-backed securities. As the stock market gained strength, investors sought higher returns by moving their money out of the bond market and into the higher yielding stock market. The whipsaw trading environment is likely to continue.

A cautious approach is necessary to protect against extreme short-term market volatility resulting in increased interest rates considering the improbability of accurately determining how the market will react on a short-term day-to-day trading basis. Taking advantage of the historically favorable interest rates at their current levels makes sense in this environment. We have seen in the last few weeks that lower rates are not always a given, even with the Fed spending $40b per month to buy mortgage-backed securities.


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MORTGAGE MARKET IN REVIEW Newsletter-October 8th, 2012
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