Rate Lock Advisory

Wednesday, January 14th

Wednesday’s bond market has opened in positive territory following mixed economic news. Stocks are helping the cause with the Dow down 77 points and the Nasdaq down 198 points. The bond market is currently up 7/32 (4.15%), which should keep this morning’s mortgage rates close to Tuesday’s early pricing. If you saw an intraday increase yesterday afternoon, you should see an improvement this morning of about the same size.

7/32

Bonds

30 yr - 4.15%

77

Dow

49,114

198

NASDAQ

23,511

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Neutral

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

Yesterday’s 30-year Treasury Bond auction drew a relatively decent demand from investors. The benchmarks we use indicated interest in the securities was above average compared to other recent sales, slightly exceeding demand in Monday’s 10-year Note sale. We saw even less of a reaction to the 1:00 PM ET results announcement than we did Monday, meaning the auction had no impact on mortgage rates.

High

Negative

Retail Sales

The first two of today’s four reports came at 8:30 AM ET when November’s Retail Sales report and wholesale inflation indexes were released for October and November. The sales data showed consumers spent more in November than many had thought. The 0.6% increase in overall sales exceeded forecasts of 0.4%, as did a secondary reading that excludes more costly and volatile auto transactions (up 0.5% vs 0.3%). Stronger consumer spending numbers are bad news for bonds and mortgage rates because this category makes up over two-thirds of the U.S. economy. Unexpected strength in spending fuels broader economic growth that makes bonds less appealing to investors and leads to higher mortgage rates.

High

Neutral

Producer Price Index (PPI)

This morning’s other early release was November’s Producer Price Index (PPI) that included data from October also. It revealed wholesale level inflation rose 0.2% while core data that excludes more volatile food and energy costs was unchanged. Both readings were a bit softer than expected for the month. However, the annual rate of inflation for both readings came in at a 3.0% pace. These were higher than expected and up from the previous readings of 2.7%. This data points towards wholesale inflation being hotter than expected year-over-year, even though the monthly readings were good news for bonds.

Medium

Negative

Existing Home Sales from National Assoc of Realtors

Today’s third economic release was December’s Existing Home Sales report from the National Association of Realtors. They announced home resales jumped 5.1% last month, likely due to a decline in mortgage rates. Home sales have been extremely sensitive to any dip or increase in mortgage rates. It is a sign of housing sector strength that makes the data bad news for bonds and mortgage pricing, but wasn’t strong enough to offset this morning’s early bond gains.

Medium

Unknown

Fed Beige Book

We will also get the Federal Reserve's Beige Book report at 2:00 PM ET. It is named simply after the color of its cover and details economic conditions throughout the U.S. by Fed region through the eyes of their business contacts. We aren’t expecting to see a significant change in conditions since the last update, but the report does carry enough importance to affect rates if there is a surprise since the Fed uses this report during their monetary policy meetings. Traders will be focused on feedback about rising prices (inflation) and details about the employment situation in each region, in addition to other comments. If there is a reaction to this release, it will come during mid-afternoon trading. Signs of further weakness in the employment sector and easing prices would be good news for rates.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

Tomorrow’s only relevant economic news will be the weekly unemployment update at 8:30 AM ET. It is expected to show 212,000 new claims for jobless benefits were filed. That would be an increase from the previous week’s 208,000 initial filings. Rising claims are a sign of weakness in the employment sector, so the higher the number tomorrow, the better the news it will be 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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