Friday, July 31th
Friday’s bond market has opened in well in negative territory to close the week with a bump in mortgage rates. Stocks are also showing losses with the Dow down 158 points and the Nasdaq down 86 points. The bond market is currently down 14/32 (4.73%), which should cause an increase in this morning’s mortgage rates of approximately .375 - .500 of a discount point if compared to Thursday’s morning pricing.
14/32
Bonds
30 yr - 4.73%
158
Dow
52,049
86
NASDAQ
25,035
Trailing 90 Days - National Average
Medium
Negative
The first of this morning’s two economic releases was the 2nd Quarter Employment Cost Index (ECI) at 8:30 AM ET. It showed a 0.9% increase, meaning employer costs for wages and benefits rose a bit more than expected during the April through June months. Forecasts had the increase coming in at 0.8%. The stronger reading is bad news for the bond market and mortgage rates because employers likely need to pass those costs into what their customers pay for their services or products, contributing to rising inflation in the economy.
Medium
Negative
We also received July's revised Index of Consumer Sentiment from the University of Michigan at 10:00 AM ET. They announced a reading of 55.2 that exceeded expectations of 54.4 that was July’s preliminary estimate earlier this month. Rising sentiment from consumers is troublesome for the bond market and mortgage rates because they tend to spend more if they feel good about their own financial situations. This fuels economic growth that tends to favor stocks and hurts bonds, leading to higher mortgage rates.
Medium
Negative
Neither of this morning’s economic reports carry enough influence to be the sole cause of today’s early bond selling. There are rumors of losses related to Japan selling U.S. securities to support their domestic currency (yen). We could also be seeing concerns about what will happen in the Middle East this weekend as more countries appear to be on the verge of being dragged into the conflict with Iran. Those concerns could cause investors to sell holdings ahead of the weekend to protect themselves. In other words, there probably isn’t a singular reason for this morning’s bond sell-off.
High
Unknown
Next week brings us a new batch of highly important economic data for the markets to digest. The week’s calendar begins with and ends with reports that have the potential to cause a big move in rates. In between, there are several moderately important releases that could affect rates also. Now that the FOMC meeting is behind us, so is the Fed’s quiet period. This means individual Fed members can speak publicly about topics such as the economy and/or monetary policy again. There is one particular speaking engagement scheduled for Wednesday afternoon that will draw attention because it has a topic of Economic Outlook. Monday’s economic release comes from the Institute for Supply Management (ISM), who will post their July manufacturing index at 10:00 AM ET. Look for details on it and the rest of the week’s activities in Sunday evening’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... 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.