Mortgage rates took a second step in the right direction yesterday after the Treasury Department reported strong demand at the 10 year Treasury note auction. This helped benchmark Treasuries rally which led the way for mortgage-backed securities prices to improve considerably.  MBS price gains held steady into the market close which allowed most lenders to republish rate sheets for the better. To remind readers, as MBS prices move higher, lenders are able to pass along lower mortgage rates.

The only economic report to hit news wires this morning was Weekly Jobless Claims.  This data provides three measures on the health of the labor market:

1. Initial Jobless Claims:  totals the number of Americans who filed for first time unemployment benefits
2. Continued Claims:  totals the number of Americans who continue to file for benefits due to an inability to find a new job
3. Extended Benefits:  totals the number of Americans who have exhausted their traditional benefits and are now receiving emergency benefits

Since our economy is driven by consumer spending, economists track employment data to get a sense of future economic momentum. Higher jobless claims lead to less consumer spending, which is bad for the overall economy but generally helpful in keeping mortgage rates from rising.  No consistent trend of improvements had developed in jobless claims data, but the prior three reports have shown initial claims to be declining. That streak came to an end today though...

Initial jobless claims in the week ending April 3 unexpectedly increased 460,000. This is an increase of 18,000 from last week's revised for the worse read of 442,000 and also worse than consensus forecasts which called for 435,000 new jobless claims. Continued claims fell 131,000 to 4.55 million, the lowest amount this year.   The number of Americans who’ve used up their traditional benefits and are now collecting emergency extended benefits fell by 223,000 to 5.81 million.   Following the release of this report, MBS are holding onto all of the gains from yesterday.  For more on this report, check out AQ’s opening commentary.  READ MORE. 

At 1pm, the Department of Treasury announced the results of today’s auction of $13 billion 30 year bonds. The auction went well but not as great as yesterday's 10 year note auction. Regardless of the above average auction results, benchmark Treasury yields moved higher because of the additional amount of debt supply in the market. Several lenders were forced to republish rate sheets for the worse after the auction .

Reports from fellow mortgage professionals indicate lender rate sheets improved early in the morning but lost positive progress as the day came to a close.  The par 30 year conventional rate mortgage is still in the  the 4.875% to 5.125% range for well qualified consumers though.  To secure a par rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.  If you are seeking a 15 year term, you should expect par in the 4.25% to 4.50% range with similar fees but lower FICO score requirements. 

I continue to favor floating one day at a time.  Lenders are being very slow to pass along the price gains we have enjoyed over the last couple days.  Purchase loans must be viewed differently since they must close on a specific date while a refinance can always be delayed.   So for my personal clients, I am much more conservative with purchase loans than I am when clients are refinancing.   If you are buying a new home, you might want to take advantage of the recent drop in rates, but I am definitely not against floating.