Rate Lock Advisory

Thursday, April 9th

Thursday’s bond market has opened in negative territory as the ability of the ceasefire with Iran to hold is more of a concern than some favorable economic data. Stocks are also showing early losses, pushing the Dow down 116 points and the Nasdaq down 83 points. The bond market is currently down 4/32 (4.31%), which with weakness late yesterday should cause this morning’s mortgage rates to be higher than Wednesday’s early pricing by approximately .250 - .375 of a discount point.

4/32

Bonds

30 yr - 4.31%

116

Dow

47,793

83

NASDAQ

22,551

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

Medium

Unknown

Treasury Auctions (5,7,10,20,30 year)

Yesterday’s 10-year Treasury Note auction was mostly uneventful. The benchmarks we use to gauge the sale indicated there was a below-average demand for the securities compared to other recent sales. We saw a modest negative reaction to the 1:00 PM ET results announcement, but they weren’t weak enough to cause an intraday revision to mortgage rates. If you saw an upward revision in pricing yesterday afternoon, it was most likely due to concerns about the Iran ceasefire agreement holding and not solely because of the auction. There is another auction happening today with 30-year Bonds being sold. Results of it will also be made available at 1:00 PM ET. Good news for the broader bond market and mortgage rates would be a stronger demand for these securities than what we saw yesterday.

Medium

Neutral

FOMC Meeting Minutes

Also released yesterday afternoon were the minutes from last month's FOMC meeting. They gave us no major surprises, but did clarify how the Iran war and high oil prices are coming into their thought process. While there was nearly a unanimous agreement to keep rates unchanged at the meeting, what their next move could be was widely divided. There was a strong consensus that oil prices may contribute to inflationary pressures in the short-term even though some participants think softer employment and slower overall economic growth may call for a rate cut before a possible rate hike. They led us to believe that key rates will remain higher for longer, meaning no change to them is expected in the immediate future. We actually saw a minor improvement in bonds right after the minutes were released at 2:00 PM ET. However, it wasn’t enough of a move to affect rates or turn attention away from the Middle East headlines.

High

Neutral

Inflation News

The most important of this morning’s three economic releases was February's Personal Income and Outlays report at 8:30 AM ET that gave us the Fed’s preferred inflation readings. February’s overall Personal Consumption Expenditures (PCE) index rose 0.4% as did the more influential core reading. On an annual basis, the overall held at January’s 2.8% and the core year-over-year reading was unchanged at 3.0%. All four of the readings (monthly and annual) pegged expectations. While there was no decline in inflation, it also didn’t rise further either. Accordingly, we are labeling them neutral for mortgage rates.

Medium

Neutral

Personal Income and Outlays

The other headline readings in the first report showed income slipped 0.1% when it was expected to rise 0.3%. Spending rose 0.5% to match predictions. These numbers mean that despite a decline in overall income, consumers continue to spend. This is relevant to mortgage rates because consumer spending makes up over two-thirds if the U.S. economy. Bonds tend to become more appealing to investors during weaker economic conditions, leading to lower yields and mortgage rates track bond yields.

Medium

Positive

Weekly Unemployment Claims (every Thursday)

Also early this morning was the release of last week’s unemployment figures. They revealed 219,000 new claims for jobless benefits were made, up from the previous week’s revised 213,000 initial filings. Forecasts had the number coming around 210,000. Rising claims are a sign of weakness in the employment sector, making the data slightly favorable for bonds and mortgage pricing.

Low

Positive

GDP Rev 2 (month after Rev 1)

Today’s final release was the second revision to the 4th Quarter Gross Domestic Product (GDP), also at 8:30 AM ET. It told us that the U.S. economy grew at a 0.5% annual pace during the last three months of the year. This was a downward revision from the previous estimate of up 0.7%. A slower rate of growth in the economy is favorable for bonds and usually leads to lower mortgage rates. However, this data is quite aged at this point since market analysts are much more interested in the current quarter’s activity than data from 3-6 months ago. This is why it has had little impact on this morning’s bond trading and mortgage pricing.

High

Unknown

Consumer Price Index (CPI)

The week closes tomorrow with three more pieces of economic data, one of which is a major release. Drawing the most attention will be March's Consumer Price Index (CPI) that will give us key inflation readings at the consumer level of the economy. There are two portions of the report that analysts watch- the overall reading and the core data. The core data carries more significance to market participants because it excludes more volatile food and energy prices. Forecasts show the overall reading rising 0.9% due to a spike in gas prices and the core data up 0.3%. Annual readings are expected to be at 3.3% and 2.7% respectively. If the report shows prices are rising faster than expected, especially on an annual basis, we should see bond prices fall and yields move higher to cause another increase in mortgage rates.

Medium

Unknown

Factory Orders

February's Factory Orders report is tomorrow’s second release. It is similar to this week’s Durable Goods Orders data in giving us a measurement of manufacturing sector strength, but this version includes new orders for both durable and non-durable goods. It is not one of the more important reports we get each month, however, it can influence mortgage pricing if it varies greatly from forecasts. Analysts are expecting a 0.2% rise in new orders, indicating modest strength in the manufacturing sector. The bond market would like to see a large decline, meaning that manufacturing activity was weaker than many had thought.

Medium

Unknown

Univ of Mich Consumer Sentiment (Prelim)

The initial University of Michigan's Index of Consumer Sentiment for April is the final report of the day. This index will give us an idea of consumer confidence in their own financial situations and willingness to spend. This is relevant because consumer spending makes up such a large part of the U.S. economy. Good news would be a sizable decline from March's final reading. The lower the reading, the better the news for rates.

Float / Lock Recommendation

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... 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.

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