Rate Lock Advisory

Sunday, December 21th

This holiday-shortened week has only three relevant monthly or quarterly economic reports set for release in addition to a couple of Treasury auctions and the weekly unemployment update. All of the data comes over just two days due to the Christmas holiday with nothing set for tomorrow or Friday. Several of this week’s releases are somewhat old news now because the government shutdown pushed back their release almost two months, but two carry enough importance to cause a change to mortgage pricing if they show surprises.

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Bonds

Market Closed

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Dow

Market Closed

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NASDAQ

Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High

Unknown

Gross Domestic Product (GDP)

The week's first piece of data will come at 8:30 AM ET Tuesday morning. This is when the shutdown-delayed preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) will be released. The GDP is considered to be the benchmark gauge of economic growth because it is the total of all goods and services produced in the U.S. Accordingly, it usually has a big impact on the financial and mortgage markets. While the age of this data will likely soften its influence on the markets, it is still relevant and should draw a reaction if there is a surprise. Current forecasts show the economy expanded at a 3.2% annual pace during the July through September months. If we get a noticeably smaller rate of growth, the bond market should rally and mortgage rates will fall. However, a much stronger economy often leads to bond selling and an increase in mortgage pricing.

High

Unknown

Durable Goods Orders

Also early Tuesday morning will be the release of October’s Durable Goods Orders report that gives us a measurement of manufacturing sector strength. It tracks new orders for big-ticket products with an expected life span of at least three years, such as appliances, airplanes and electronics. This is another report that traditionally draws plenty of attention but wasn’t released as scheduled because of the government shutdown. Analysts are expecting to see a 0.4% increase in new orders, pointing to modest growth in manufacturing. It is worth noting that this data is known to be quite volatile from month to month, meaning a noticeable variance from forecasts may not have the same impact on the bond market and mortgage rates as it would in many other reports.

Medium

Unknown

Industrial Production

Tuesday’s third economic release will be the Fed’s Industrial Production report at 9:15 AM ET. This update will be a combination report that covers both October and November. It tracks output at U.S. factories, mines and utilities, giving us a sign of manufacturing strength, but isn’t considered to be one of the more important reports each month. We usually see a modest reaction to its results, even when it varies from forecasts. This version should be no different. Favorable news for mortgage rates would be a decline in production.

Medium

Unknown

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

There are two relatively important Treasury auctions this week that may influence bond trading enough to affect mortgage rates slightly. First will be an auction of 5-year Treasury Notes Tuesday followed by 7-year Notes Wednesday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, meaning investor demand was soft, we could see broader selling in the bond market that leads to upward revisions in mortgage rates. On the other hand, strong investor demand usually makes bonds more attractive to investors and brings funds into the bond market. Results of the sales will be posted at 1:00 PM ET each day. If there is a reaction to the sales, it should be minor and come shortly after those results are posted.

Low

Unknown

Holiday Schedule

The only other relevant economic data coming this week will be Wednesday morning's weekly unemployment update. Wednesday also has shortened trading ahead of the Christmas Day holiday. The bond market will close at 2:00 PM ET Wednesday while stocks will trade until 1:00 PM. The markets will reopen for regular trading Friday morning. We will likely see light trading Wednesday and Friday as many bond trading firms will be working on a skeleton staff as traders make an extended holiday weekend. This simply means that we shouldn't be too excited about an improvement in rates or concerned about an increase. When there is thin trading in the market, moves are exaggerated by the light volume and will be corrected when regular volume returns next Monday.

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Unknown

none

Overall, Tuesday is clearly the most important day for mortgage rates this week. The calmest day will probably be Friday since there is no relevant data and many traders will be out of the office. We still could see a noticeable move in rates if Tuesday’s data shows some big surprises. Therefore, please keep an eye on the markets if still floating an interest rate and closing in the near future.

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.