Rate Lock Advisory

Thursday, January 22th

Thursday’s bond market has opened in negative territory following a batch of economic news that gave mostly neutral or negative results. Stocks are likely also contributing to this morning’s pressure in bonds with the Dow up 232 points and the Nasdaq up 128 points. The bond market is currently down 6/32 (4.26%), but gains late yesterday should keep this morning’s mortgage rates modestly lower than Wednesday’s early pricing. If you saw an intraday improvement yesterday, you likely will see an increase this morning.

6/32

Bonds

30 yr - 4.26%

232

Dow

49,309

128

NASDAQ

23,352

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Positive

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

Yesterday’s 20-year Treasury Bond auction went extremely well. The benchmarks indicated a strong demand from investors compared to other recent sales, signaling they still have a good appetite for long-term securities. This is good news for mortgage rates because they are based on long-term debt. We did see a positive reaction in the bond market after results were announced at 1:00 PM ET, but the stronger move that led to some intraday rate improvements came later in the afternoon. While the auction may have helped lay the groundwork for yesterday’s late gains in bonds, it appears that news of a “framework” of a deal for the U.S. to acquire Greenland and that the additional tariffs President Trump recently put on objecting countries had gone away are what actually fueled the bond rally and intraday improvement in mortgage pricing.

Medium

Negative

Weekly Unemployment Claims (every Thursday)

The first of this morning’s three pieces of economic data was last week’s unemployment update at 8:30 AM ET. It showed only 200,000 new claims for jobless benefits were filed, up slightly from the previous week’s revised 199,000 initial filings. However, we have to label the data unfavorable for rates because analysts were expecting to see a number in the neighborhood of 206,000. The lower than predicted number can be taken as a sign the employment sector was a bit more stable last week than many had thought.

Low

Negative

GDP Rev 1 (month after initial)

Also posted early this morning was the revised 3rd Quarter Gross Domestic Product (GDP) reading that revealed the U.S. economy grew at a 4.4% annual pace during the July through September months. This was slightly stronger than the initial estimate of 4.3%, but not enough of a variance to have an impact on this morning’s trading since the data is old now. The government shutdown delayed this release from its normal November posting. Market participants are much more interested in the 4th quarter numbers that should be out soon.

High

Neutral

Inflation News

Today’s highly important economic news came from the release of the Personal Income and Outlays report at 10:00 AM ET. Despite the elevated status this report carries in the markets, it really gave us little in terms of surprises. The more influential Personal Consumption Expenditures (PCE) indexes both matched forecasts of up 0.2% in November, pegging expectations. The same can be said for the year-over-year rates of 2.8% in both the annual overall and core readings. These indexes are watched so closely because they are the Fed’s go-to readings for gauging inflation in the economy. Even though the readings came in as expected, they are another reminder that inflation is still above the Fed’s goal of 2.0% annually, making it more difficult to cut key short-term interest rates at next week’s FOMC meeting.

Medium

Positive

Personal Income and Outlays

This morning’s late report also revealed a 0.3% increase in personal income and a 0.5% rise in spending. Forecasts had income rising 0.4% and spending up 0.5%. Smaller increase in income means consumers have less money to spend. Therefore, we can consider this portion of the report to be slightly favorable for rates, but the age of the data and the minor difference between the expected and actual increase in income is preventing it from impacting this morning’s rates.

Medium

Unknown

Univ of Mich Consumer Sentiment (Prelim)

January's preliminary reading to the University of Michigan's Index of Consumer Sentiment will close out this week’s economic release at 10:00 AM ET tomorrow morning. This index helps us predict consumer willingness to spend by tracking their opinions on their personal financial and employment situations. By theory, if consumers feel better about their finances, they are more apt to make a large purchase in the near future. Stronger consumer spending numbers translate into economic growth that makes stocks more appealing and bonds less attractive to investors. Predictions show little change from December's 54.0. The lower the reading, the better the news for bonds and mortgage 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.