Sample Commentary Report




Friday’s bond market has opened sharply higher again as more coronavirus concerns fuel another major stock sell-off. The Dow is currently down 842 points following yesterday’s drop of almost 1200 points that was the largest single day decline ever. The Nasdaq has lost 203 points during early trading also. The bond market is currently up 30/32 (1.17%), which should improve this morning’s mortgage rates by approximately .250 – .375 of a discount point from Thursday’s early pricing.

This morning’s first economic release was January’s Personal Income and Outlays report at 8:30 AM ET. It revealed that personal income rose 0.6% while spending Rose only 0.2%. The income reading was higher than expectations of up 0.4% and spending came in slightly lower than expectations. The larger than expected increase in income is bad news, but the fact that consumers actually spent less than thought is good news for bonds and mortgage rates. Therefore, we can consider the report’s mixed or neutral for mortgage rates.

The University of Michigan’s revision to their Index of Consumer Sentiment for February was posted at 10:00 AM ET, revealing a 101.0 reading. That was nearly unchanged from the initial reading of 100.9, meaning surveyed consumers were just as optimistic about their own financial situations than estimated earlier this month. Good news for rates would have been a softer reading.

Even though this morning’s data gave us mixed results, the fact is that the data was not going to have a role in the markets this morning. Once the overnight losses in stocks and bond gains picked up momentum, the data became irrelevant to today’s trading. The fear of what impact the coronavirus is going to have on the global economy is the sole force behind today’s volatility. Major stock indexes were setting record highs last week, but this week is their worst since the financial meltdown in 2008. Some analysts are predicting that central bankers (Federal Reserve here in the U.S.) will need to start taking action to offset the impact the crisis is going to have on the global economy and to help settle the financial markets.

How low will stocks and bond yields go? There is no way to know. We are setting a new record low again today in the benchmark 10-year Treasury Note yield. While yields have dropped considerably, mortgage rates have not moved as quickly. That is because even though rates do track bond yields in direction, they often move at a slower pace than government securities. Rates are actually priced off of Mortgage Backed Securities (MBS), which are more complex securities than the 10-year Treasury Note that we quote here. Treasury yields are also more accessible to the general public. The good news is that when yields tend to track upward, mortgage rates often lag behind then also. It will be interesting to see what the immediate future brings for the markets and mortgage pricing, but it is safe to say that the volatility is not over yet, especially as we get more and more news of the virus spreading.

Next week doesn’t have a large number of economic reports set for release, but a couple of them are considered to be extremely important to the markets. None of the reports are set for Monday. As we have seen this week though, economic data isn’t always the focus of the markets. Weekend news, specifically news related to the coronavirus crisis, can also heavily influence the financial and mortgage markets.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float 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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