Mortgage-backed securities (MBS) improved again Monday, ahead of the U.S. elections.
The Fannie Mae 30-year 3.0% coupon gained +7/32 to close at 105.03. The Ginnie Mae 30-year 3.0% coupon gained +9/32 to close at 106.20.
Fannie Mae bonds are linked to conforming mortgage rates and Ginnie Mae bonds are linked to FHA and VA mortgage rates. Monday marked the second straight day that FHA and VA mortgage rates out-gained conforming ones.
All mortgage rates improved Monday but rates for the FHA Streamline Refinance and the VA Streamline Refinance are approaching all-time lows.
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Mortgage Rates Down Ahead Of U.S. Elections
Mortgage rates dropped Monday amid a mood of uncertainty. Investors sought safe ground before Tuesday’s U.S. elections, and in the aftermath of Hurricane Sandy, a storm projected to have caused more than $50 billion in damage.
Bonds markets gained and stock markets lost.
Ahead of Tuesday’s presidential election, global investors moved en masse into bonds — including mortgage-backed ones.
It may be that traders are taking a wait-and-see approach to the election; removing their bets from the proverbial table. Or, they may be preparing for a scenario in which the Democratic party controls the White House, with Congress divided among Democrats and Republicans.
Wall Street believes that an Election Day outcome such as this would be a positive for the bond market which, for homeowners and home buyers, would lead to lower mortgage rates nationwide.
It may also be that, with damage estimates of $50 billion positioning Hurricane Sandy as second only to Hurricane Katrina in terms of total losses, investors may be sticking with the relative safety of the U.S. bond market.
Ongoing concerns with the struggling economies of Greece and Spain contributed to falling rates, too.
Lastly, also Monday, the Institute for Supply Management (ISM) Index for October 2012 was published. It read 54.2 — slightly below September’s reading of 55.1. The ISM is based on a national survey of purchasing managers and is considered to be an indicator of the health of U.S. manufacturing. The ISM also forecasts future inflationary pressures as it measures manufacturing costs which are typically passed on to consumers.
Readings over 50 are considered expansionary.
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Tuesday : Election Day, Treasury Auction
Other than a scheduled 3-year Treasury Note auction scheduled for 1:00 PM ET, the U.S. economic calendar is empty for Tuesday. Watch for mortgage rates to get bandied about by Election Day stories and projected results. Note, however, that most Election Day news and coverage will occur Tuesday after U.S. markets close.
This means that rates may open wildly Wednesday morning.
Mortgage rates remain near all-time lows and this week’s momentum has opened a new window for refinancing. If you’ve been waiting for mortgage rates to “bottom-out” and want to take your risk off the table, today and Tuesday mark good days on which to do it. By Wednesday, rates could be moving back up.
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