Wednesday, September 6, 2017

What's going on and why does it matter? Mortgage bonds opened slightly lower this morning after yesterday's massive "flight to safety" rally. Investors are favoring bonds in light of various risk events, including ongoing tensions between the US and North Korea, uncertainty about budget negotiations in Congress, category 5 Hurricane Irma plowing through the Caribbean, and cautiousness ahead of tomorrow's European Central Bank monetary policy meeting. Even so, bond investors may be reluctant to continue driving bond prices higher due to the "prepayment risk" of borrowers with higher-rate loans refinancing into loans with lower rates. Bond investors lose money when this happens, so this may put a damper on further mortgage price improvements.  Keep in mind that mortgage prices are currently at their best levels in over 10 months. The Fed's mortgage bond buying program today is limited to $600 million of 15-year conventional mortgages. What should you do about it?   Lock your rate to be safe.     ..... Economic reports that may impact mortgage rates this week: Date Report Period Prior Est. Actual Tue 5 Sep Factory Orders Jul 3.0% -3.3% -3.3% Wed 6 Sep ISM Non-Mfg PMI Aug 53.9 55.4   Thu 7 Sep Initial Jobless Claims Week of Aug 28 236k 237k   Fri 8 Sep Wholesale Sales Jul 0.7% 0.4%