Daily Mortgage Rate Lock Advisory

Rate Lock Advisory – Tuesday Jan. 6th

Tuesday’s bond market has opened in negative territory again as long-term securities are falling out of favor with investors. The stock markets are showing gains with the Dow up 46 points and the Nasdaq up 20 points. The bond market is currently down 16/32, which will likely push this morning’s mortgage rates higher by another .375 of a discount point.

The Commerce Department posted November’s Factory Orders data this morning, reporting a drop of 4.6% in new orders. This data gives us a fairly important measurement of manufacturing sector strength and was expected to show a decline in orders of 2.6%. This means that the manufacturing sector was weaker than expected. However, even though this is good news for bonds, other pressures are making the results a non-factor in today’s trading.

The 10-year TIPS Notes (inflation-indexed securities) will be auctioned today with its results being posted at 1:00 PM ET. If investor demand was strong, we sh ould see bonds strengthen during afternoon trading. However, a lackluster interest in the sale could cause bond prices to fall and mortgage rates to move higher following the announcement of the sale results.

Later this afternoon we will get to see the minutes from the last FOMC meeting. This will give market participants insight to the Fed’s thinking and concerns regarding inflation and monetary policy. It may also help form opinions of the Fed’s future moves toward interest rates, even though the Fed appears to be running out of options. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they shouldn’t affect the markets or mortgage rates until afternoon hours.

There is no relevant economic data scheduled for release tomorrow, so look for the stock markets to influence bond trading and possibly mortgage rates. I am expecting to see more pressure in bonds, until at least Friday when we will get December’s Employment report.

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.

Rate Lock Advisory – Sunday Jan. 4th

This week bring us the release of only two monthly reports that are relevant to the bond market and mortgage rates. However, in addition to those two reports, we also will see the minutes from the last FOMC meeting and a couple of Treasury auctions that may influence bond trading and possibly mortgage rates.

The first of the two reports will be posted late Tuesday morning when the Commerce Department releases November’s Factory Orders data. This data gives us a fairly important measurement of manufacturing sector strength. It is similar to the Durable Goods Orders release that was posted late last month, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see a decline of 2.6% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a minor change in rates.

Also Tuesday will be the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed’s thinking and concerns regarding inflation and monetary policy. It may also help form opinions of the Fed’s future moves toward interest rates, even though the Fed appears to be running out of options. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they shouldn’t affect the markets or mortgage rates until afternoon hours.

There are two Treasury auctions that are worth watching also. The 10-year TIPS Notes (inflation-indexed securities) will be auctioned Tuesday while the traditional 10-year Treasury Note will be sold Thursday. If investor demand for these sales is strong, we should se e bonds strengthen during afternoon trading those days and possibly improve mortgage rates slightly. However, a lackluster interest in the sales could cause bond prices to fall and mortgage rates to move higher following the announcement of the sale results.

The final report of the week comes Friday morning when the Labor Department will post December’s employment figures. The Employment report is considered to be one of the most important monthly releases we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a larger than expected drop in new payrolls and a small increase or even a decline in earnings would be good news for the bond market.

Current forecasts call for a 0.3% increase in the unemployment rate, pushing it to 7.0%. Analysts are expecting to see a drop in payrolls in the neighborhoo d of 475,000 with earnings rising 0.2%. If we see weaker than expected results, mortgage rates should improve Friday. However, stronger than expected readings will likely push mortgage rates higher.

Overall, the key data of the week will be Friday’s Employment report, but look for Tuesday to be important with the economic data, FOMC minutes and one of the two more important Treasury auctions. If they give us favorable results, mortgage rates will likely move lower for the week. But if not, we will probably see mortgage rates move higher again.

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 guarante ed to be in the best interest of all/any other borrowers.

Thursday’s bond market has opened in positive territory following sizable stock losses. The stock markets are reacting to weak earnings news as the Dow fell 130 points and the Nasdaq lost 9 points. The bond market is currently up 16/32, which will likely improve this morning’s mortgage rates by approximately .250 – .375 of a discount point over yesterday’s morning rates.

The Labor Department gave us last week’s unemployment figures early this morning. They reported that 455,000 new claims for benefits were filed when analysts had predicted 420,000. This was a 6 year high for new claims and raises concerns that the employment sector is quickly weakening. This is good news for bonds and mortgage rates, however, since this data tracks only a week’s worth of filings it is not considered to be of high importance to the bond market.

Yesterday’s Treasury auction went fairly well and led to afternoon buying in bonds. Today’s sale will bring 30 year bonds to market and if investor demand is also strong we could see afternoon improvements in bonds again today. Results of the auction will be posted at 1:00 PM ET.

Employee Productivity and Costs data for the second quarter will be released early 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 2.5%. A higher than expected reading could help improve bonds, leading to lower mortgage 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.