Daily Mortgage Rate Lock Advisory

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William Braddock

Tuesday’s bond market has opened down slightly despite the release of weaker than expected economic news. The stock markets have recovered some of yesterday’s losses with the Dow up 54 points and the Nasdaq up 15 points. The bond market is currently down 3/32, which should keep this morning’s mortgage rates at yesterday’s morning levels.

The Labor Department gave us July’s Producer Price Index (PPI) this morning, saying that the overall index fell 0.9% and that the core data reading fell 0.1%. Analysts had predicted a 0.2% decline in the overall reading and a 0.1% rise in the core data. This means that prices at the producer level of the economy were much weaker than expected. That indicates that inflationary pressures at that level are not a concern at the moment, making long-term securities such as mortgage related bonds more attractive to investors. Unfortunately, traders seem to be more concerned with the stock markets than today’s economic news.

The second report of the day was also favorable for bonds, but it is much less important than the PPI reading. The Commerce Department said that starts of new homes fell last month, hinting that the housing sector may not be as ready to recover as some analysts had thought. Many market participants were expecting to see an increase in stats of new homes. A weak housing sector if favorable to bonds because it makes a broader economic recovery less likely in the immediate future.

There is no relevant economic data scheduled for release tomorrow, so look for the stock markets to again influence bond trading and mortgage pricing. If the stock markets can hold this morning’s gains and move higher tomorrow morning, there is a pretty good possibility of seeing mortgage rates inch higher tomorrow. But if we see stock weakness, bonds may benefit, pushing mortgage rates lower.

Thursday’s primary data is July’s Leading Economic Indicators (LEI) from the Conference Board. This index attempts to measure economic activity over the next three to six months and is considered to be moderately important. A higher than expected reading is bad news for the bond market because it indicates that the economy may be strengthening more than thought. However, a weaker than expected reading means that the economy may not grow as much as predicted, making stocks less appealing to investors. This also eases inflation concerns in the bond market and could lead to slightly lower mortgage rates Thursday if the stock markets remain calm. Current forecasts are calling for an increase of 0.6% in the index, indicating economic growth over the next couple of months.

If I were considering financing/refinancing a home, I would….
Lock if my closing was taking place within 7 days…
Lock 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…
This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Monday’s bond market has opened in positive territory following early stock selling. The stock markets are following several international markets that posted losses during overnight trading. The Dow is currently down 188 points while the Nasdaq has fallen 51 points. This has helped push the bond market up 22/32 as investors seek safe-haven from falling stock prices. However, the impact on this morning’s mortgage rates has been fairly minimal. We will likely see little change from Friday’s morning rates due to volatility in trading late Friday.

There is no relevant economic data scheduled for release this morning. The rest of the week brings us the release of four reports that may influence mortgage rates, but only one of them is considered to be highly important. With no relevant auctions or speeches on tap, I suspect we will see much less movement in mortgage rates this week compared to the past couple of weeks.

There are two reports scheduled to be posted tomorrow morning. The first is July’s Producer Price Index (PPI) that gives us an indication of inflation at the producer level of the economy. There are two readings in the report- the overall index and the core data reading. The core data is more important because it excludes more volatile food and energy prices that can change significantly from month to month. Current forecasts call for a decline of 0.2% in the overall and a 0.1% increase in the core data reading. A larger increase in the core data could push mortgage rates higher tomorrow morning. If it reveals weaker than expected readings, we may see mortgage rates improve as a result.

The second report of the day is July’s Housing Starts data. This report gives us an indication of housing sector strength and mortgage credit demand. However, it isn’t considered to be of high importance to the bond market or mortgage pricing and usually doesn’t cause much movement in mortgage rates unless it varies greatly from forecasts. It is the least important of the week’s reports and is expected to show an increase in construction starts of new homes. The lower the number of starts the better the news for bonds as it would indicate a weaker than expected housing sector.

Overall, look for tomorrow to be the busiest day of the week due to the PPI being released. The rest of the week will likely be influenced more by stock prices than anything else, which may be quite volatile. Therefore, keep an eye on the markets and maintain contact with your mortgage professional if you have not locked an interest rate yet.

If I were considering financing or refinancing a home, I would….
Lock if my closing was taking place within 7 days…
Lock 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…
This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all or any other borrowers.

Friday’s bond market has opened in positive territory again after this morning’s economic data failed to give us any major surprises. Contributing to today’s early bond strength is a weak opening for stocks that has the Dow down 131 points and the Nasdaq down 32 points. The bond market is currently up 13/32, which with yesterday’s late strength should improve this morning’s mortgage rates by approximately .500 of a discount point compared to yesterday’s morning rates.

The Labor Department gave us today’s most important data with the release of July’s Consumer Price Index (CPI). They reported that the overall index was unchanged form June’s level and that the core data reading rose 0.1%. Both of these readings matched forecasts, indicating that consumer prices remain in-check last month. But the index has fallen 2.1% over the past 12 months, matching the largest year-over-year decline since 1950. That is good news for bonds because it means that inflation is not currently a threat to the economy. Inflation erodes the value of a bond’s future fixed interest payments, leading to higher mortgage rates. When inflation concerns are low, bonds are usually more appealing to investors. As bonds are bought, their prices rise, pushing their yields and mortgage rates lower.

The second report of the day was Industrial Production data for July. It showed a 0.5% increase in output and U.S. factories, mines and utilities. Analysts were expecting to see a 0.4% rise, meaning manufacturing activity was slightly stronger than expected.
This can be considered negative for bonds, but the minimal size of the variance and the fact that this data is not extremely important to the markets has prevented it from affecting this morning’s mortgage pricing. The final report of the week was the University of Michigan’s Index of Consumer Sentiment for August late this morning. It gave us a reading of 63.2 that was well below forecasts of a 69.0 that was expected. That indicates that consumers were less optimistic about their own financial situations than many had thought. This is good news for bonds because falling confidence usually translates into weaker levels of consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely.

Yesterday’s 30-year Bond auction went fairly well, leading to higher bonds prices during afternoon trading Thursday. This caused some lenders to revise their rates slightly lower late yesterday, while others may have waited until this morning to reflect those changes.

Next week is relative light in terms of economic releases, at least if comparing to the last two weeks. There is no relevant data scheduled to be posted Monday, but we will get another important inflation reading later in the week. Look for more details on next week’s events in Sunday’s weekly preview.

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

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Thursday’s bond market has opened in positive territory following much weaker than expected consumer spending news. The stock markets are showing minor gains with the Dow up 27 points and the Nasdaq up 10 points. The bond market is currently up 15/32, which will likely improve this morning’s mortgage rates by approximately .125 of a discount point. Preventing a slightly larger improvement in rates was weakness late yesterday after the FOMC meeting.

The Commerce Department announced this morning that retail level sales fell 0.1% last month. This was well off forecasts of a 0.7% increase, meaning that consumers were spending much less than expected. Even if volatile auto-related sales are excluded, sales fell much more than expected. This is very good news for the bond market and mortgage rates because consumer spending makes up two-thirds of the U.S. economy. If consumer spending is still falling, the broader economic recovery cannot be close. Generally speaking, a weak economy is a better environment for bonds and makes mortgage-related bonds more attractive to investors.

Also posted this morning were weekly unemployment figures from the Labor Department. They reported that 558,000 new claims for benefits were filed last week. This was an increase from the previous week, but more importantly, analysts were expecting to see a decline in new claims. However, since this data basically tracks only a week’s worth of claims, it usually has little impact on mortgage rates and has not influenced trading this morning.

Early this afternoon we will get the results of today’s 30-year Bond auction. This sale is not as important to mortgage rates as yesterday’s 10-year sale was. But if the auction is met with an overly strong demand from investors or a particularly weak interest, we may see bond prices move enough during afternoon trading to cause revisions to mortgage rates. The results will be posted at 1:00 PM ET.

Tomorrow morning brings us the release of three reports. The first is July’s Consumer Price Index (CPI) at 8:30 AM. The CPI is one of the most important reports we see each month. It measures inflation at the consumer level of the economy. There are two readings in the report- the overall index and the core data reading. The more important of the two is the core data because it excludes more volatile food and energy prices. Current forecasts call for no change in the overall index and a 0.1% increase in the core data reading. Declines in the readings, especially in the core data, should lead to a bond rally and lower mortgage rates. However, stronger than expected readings will likely cause a spike in mortgage pricing tomorrow.

The remaining two pieces of data are relevant to mortgage rates but not nearly important as the CPI is. The second report of the day is Industrial Production data for July. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be of moderately high importance and may cause movement in mortgage rates. Analysts are currently expecting to see a 0.4% increase in production between June and July. A larger increase in output could lead to higher mortgage rates tomorrow, but only if the CPI’s results are a non-factor in rates.

The last report of the day will come from the University of Michigan who will release its Index of Consumer Sentiment for August at 9:45 AM. This index gives us a measurement of consumer willingness to spend. If confidence is rising, then consumers are more apt to make large purchases. This helps fuel consumer spending and economic growth. A drop in confidence will probably help boost bond prices. If the index rises, indicating that confidence is rising and spending is likely to continue, we may see mortgage rates move higher Friday morning. However, this is the least important of the day’s three reports and will probably have the least impact on rates.

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

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

WEDNESDAY AFTERNOON UPDATE:

This week’s FOMC meeting has adjourned with no change to key short-term interest rates. This was widely expected by market participants. The post-meeting statement really didn’t give us any new insight to the Fed’s next move. It did renew the same thoughts previously mentioned- that the economy is leveling off but to expect weak economic conditions for the immediate future. They also indicated that inflation is not an immediate concern to the economy.

The lack of a change to rates had no impact on trading as it was expected. The portion of the statement that indicated the spiraling economy is stabilizing can be considered somewhat negative for the bond market. However, the lack of concern about inflationary pressures offset any concerns that may have arisen from the reminder than the economic downturn is slowing.

Today’s 10-year Treasury Note auction has caused some stress in bonds during afternoon trading though. The sale was met with an average demand at best. The results were far from the worst we have seen but also nowhere near the recent levels of interest. This led to bond prices falling immediately after the 1:00 PM ET announcement and the FOMC meeting has done nothing to push them higher. Overall, I am expecting to see a small upward revision to mortgage rates this afternoon. If your lender does not revise higher today, it will be built into tomorrow’s pricing. Some lenders may opt to wait for tomorrow morning’s key economic data to be posted before reflecting this change. If that is the case, keep in mind you already have a slight increase waiting from this afternoon’s events.

This morning’s only relevant economic data was June’s Trade Balance report that revealed a $27.0 billion deficit. This was smaller than expected, but this data is not considered to be highly important to the markets so its impact on this morning’s trading and mortgage rates was minimal.

Tomorrow morning’s sole monthly report is July’s Retail Sales data. This data is very important to the financial markets and mortgage rates because it helps us measure consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any data related to it can cause a fair amount of movement in the markets. A smaller than expected increase would indicate that consumers are spending less than previously thought, potentially slowing the economic recovery. This is good news for the bond market and mortgage rates as it eases inflation concerns and makes long-term securities such as mortgage-related bonds more attractive to investors. Current forecasts are calling for an increase of 0.7%.

If I were considering financing/refinancing a home, I would….
Lock if my closing was taking place within 7 days…
Lock if my closing was taking place between 8 and 20 days…
Lock if my closing was taking place between 21 and 60 days…
Lock if my closing was taking place over 60 days from now…

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Wednesday’s bond market has opened in negative territory following early stock strength and concerns over today’s FOMC meeting adjournment. The stock markets are showing strong gains with the Dow up 130 points and the Nasdaq up 32 points. The bond market is currently down 12/32, which should push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point compared to yesterday’s morning rates.

This morning’s only relevant economic data was June’s Trade Balance report that revealed a $27.0 billion deficit. This was smaller than expected, but this data is not considered to be highly important to the markets so its impact on this morning’s trading and mortgage rates has been minimal.

It will likely be an active afternoon for the markets and mortgage rates. The results of today’s 10-year Treasury Note auction will be posted at 1:00 PM ET and this week’s
FOMC meeting will adjourn at 2:15 PM ET. Either of these events can lead to afternoon swings in the financial markets and mortgage rates, so expect to see some afternoon revisions today.

This report will be updated shortly after the markets have an opportunity to react to the FOMC statement, but I am holding my cautious approach towards rates into this afternoon’s events. I would not be surprised to see upward revisions to rates later today.

If I were considering financing/refinancing a home, I would….
Lock if my closing was taking place within 7 days…
Lock if my closing was taking place between 8 and 20 days…
Lock if my closing was taking place between 21 and 60 days…
Lock if my closing was taking place over 60 days from now…
This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Tuesday’s bond market has opened in positive territory following early stock weakness and favorable result sin this morning’s economic news. The stock markets are posting noticeable losses with the Dow down 97 points and the Nasdaq down 26 points. The bond market is currently up 14/32, which with yesterday’s late strength should improve this morning’s mortgage rates by approximately .375 – .500 of a discount point over yesterday’s morning rates.

Today’s relevant economic data was Employee Productivity and Costs data for the second quarter. It showed a sharp increase in productivity compared to the 1st quarter’s final reading. The 6.4% jump was higher than analysts had expected and is considered good news for bonds and mortgage rates. This data didn’t push stocks lower, but the drop in stocks has also helped boost bond prices this morning.

June’s Trade Balance report will be released early tomorrow morning. It gives us the size of the U.S. trade deficit but is the week’s least important report and likely will have little impact on the bond market and mortgage rates. Analysts are expecting to see a $28.6 billion deficit, but it will take a wide variance to directly influence mortgage pricing.

The FOMC meeting that began today will adjourn at 2:15 PM ET tomorrow. It is expected to yield no change to key interest rates. Usually, the post-meeting comments seem to have more of an influence on the markets than the rate adjustments themselves, or a lack of one in many cases. Look for the statement to lead to volatility during afternoon trading if it hints at what the Fed’ s next move may be and when it will come. If the statement does not give us new information, mortgage rates will probably move little after its release.

The most important data of the week comes Thursday and Friday when we will get measurements of consumer spending, inflation at the consumer level of the economy, industrial production and consumer sentiment. This is where we will probably see the most movement in rates and I will remain very cautious towards rates until we get past the FOMC statement and those economic reports. I suspect that we may see bond prices react negatively to some of the upcoming events that will lead to another increase in mortgage rates.

Also worth noting are two important Treasury auctions this week. The sale of 10-year Notes will be held tomrorow while 30-year Bonds will be sold Thursday. We often see some weakness in bonds ahead of the sales as the firms participating prepare for them. However, as long as they are met with decent demand from investors, the firms usually buy them back. This tends to help recover any presale losses. But, if the sales are met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM each sale day.

If I were considering financing/refinancing a home, I would….
Lock if my closing was taking place within 7 days…
Lock if my closing was taking place between 8 and 20 days…
Lock if my closing was taking place between 21 and 60 days…
Lock if my closing was taking place over 60 days from now…

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Monday’s bond market has opened up slightly as traders prepare for this week’s data and other important events. The stock markets are showing minor losses with the Dow down 12 points and the Nasdaq down 2 points. The bond market is currently up 4/32, but we will likely see an improvement in this morning’s rates of approximately .125 -
.250 of a discount point compared to Friday’s morning rates.

There is no relevant economic data scheduled for release today. The rest of the week brings us the release of six relevant economic reports in addition to another FOMC meeting. The first is Employee Productivity and Costs data for the second quarter that will be released tomorrow morning. It will give us an indication of employee output. High levels of productivity are believed to allow the economy to grow without fears of inflation. I don’t see this being a big mover of mortgage pricing, but since it is the only data of the day it may influence rates slightly. Analysts are currently expecting to see an increase in productivity of 5.4%. A higher than expected reading could help improve bonds, leading to lower mortgage rates tomorrow.

The FOMC meeting will begin tomorrow morning and adjourn at 2:15 PM ET Wednesday. It is expected to yield no change to key interest rates. Usually, the post-meeting comments seem to have more of an influence on the markets than the rate adjustments themselves, or a lack of one in many cases. Look for the statement to lead to volatility during afternoon trading if it hints at what the Fed’s next move may be and when it will come. If the statement does not give us new information, mortgage rates will probably move little after its release.

The most important data of the week comes Thursday and Friday when we will get measurements of consumer spending, inflation at the consumer level of the economy, industrial production and consumer sentiment. This is where we will probably see the most movement in rates.

Also worth noting are two important Treasury auctions this week. The sale of 10-year Notes will be held Wednesday while 30-year Bonds will be sold Thursday. We often see some weakness in bonds ahead of the sales as the firms participating prepare for them. However, as long as they are met with decent demand from investors, the firms usually buy them back. This tends to help recover any presale losses. But, if the sales are met with a lackluster interest from investors, particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM each sale day.

Overall, look for the most movement in bond prices and mortgage rates the second half of the week. Thursday or Friday will likely turn out to be the most important day. If we get stronger than expected results in the Retail Sales report and Consumer Price Index, I fear that we may see mortgage rates spike higher fairly quickly. I suspect the FOMC meeting will not have as much of an influence on mortgage rates as recent meetings have, but the markets can react wildly to a single word or omission of a word in the statement, so we need to be cautious. This is certainly another week that continuous contact with your mortgage professional is highly recommended if you are still floating an interest rate.

If I were considering financing/refinancing a home, I would….
Lock if my closing was taking place within 7 days…
Lock if my closing was taking place between 8 and 20 days…
Lock if my closing was taking place between 21 and 60 days…
Lock if my closing was taking place over 60 days from now…

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.