Rate Lock Advisory

Sunday, May 24th

This week has five monthly or quarterly economic reports that we will be watching in addition to a couple of Treasury auctions and some Fed speeches. Of course, there will also be headlines from the Middle East that will affect the markets, including some very interesting news this weekend. The financial and mortgage markets will be closed tomorrow for the Memorial Day holiday and will reopen Tuesday morning for regular trading hours. Since the markets are closed and no data is being released, there will not be an update to this report tomorrow.

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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

Positive

Iran War Headlines

News this weekend that the U.S. and Iran have taken a big step towards a peace deal to end the war and reopen the Strait of Hormuz will likely cause a significant move in the markets Tuesday. Oil prices have already dropped, leading us to believe that the bond market should rally when it reopens Tuesday. While mortgage rates should drop Tuesday morning, it is also important to remember that we have seen headlines toting progress in the past, but only to end up being inaccurate or overly optimistic. At this moment, we are treating the news as favorable for mortgage rates with an asterisk that warns this could change between now and Tuesday morning.

Medium

Unknown

Consumer Confidence Index

The Conference Board will start this week’s economic calendar with the release of their May Consumer Confidence Index (CCI) at 10:00 AM Tuesday. This data measures consumer confidence in their own financial situations, giving us a sign of willingness to spend. If confidence is sliding, analysts think consumer spending may slow in the near future. That would be good news for the bond market because consumer spending is such a big portion of the U.S. economy and bonds tend to thrive in weaker economic conditions. Tuesday's release is expected to come in at 92.0, down from April's 92.8. A larger decline in the index would be considered good news for mortgage rates.

Low

Unknown

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

Wednesday doesn’t have any relevant economic data that we need to be concerned about, but does have a few other events that may have an impact on the markets and mortgage rates. They begin with the 1:00 PM ET results announcement of the day’s 5-year Treasury Note auction. This is the first of this week’s two auctions that we will be following, although neither is expected to cause a noticeable move in rates since they are sales of shorter-term securities and rates are based on long-term debt. Thursday has 7-year Notes being sold. Favorable news for rates would be a strong demand for the securities even though any reaction is likely to be minimal.

Medium

Unknown

Fed Talk

The other events set for Wednesday are Fed speakers that are talking about topics that are related to the economy and/or monetary policy. There is one set for 3:55 PM ET Wednesday afternoon and another at 8:00 PM ET. This means if the bond and mortgage markets have a reaction to what is said, it will be reflected in Thursday morning’s pricing.

High

Unknown

Personal Income and Outlays

Thursday is by far the busiest day of the week with five reports set for release if we include the weekly unemployment update. The most important of the group is April's Personal Income and Outlays data at 8:30 AM ET. The title readings give us an indication of consumer ability to spend and current spending habits. A rise in income means that consumers have more money available to spend. Since consumer spending makes up over two-thirds of our economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts show a 0.4% increase in the income reading while spending rose 0.5%.

However, what makes this report so important are the Personal Consumption Expenditures (PCE) indexes in it that the Fed relies heavily on as a gauge of inflation. Weaker numbers would be considered good news for bonds and mortgage rates, but the overall and core PCE readings will draw much more attention than the income and spending numbers. The monthly and annual PCE readings should drive Thursday's bond trading and mortgage pricing.

Medium

Unknown

GDP Rev 1 (month after initial)

The first revision to the 1st quarter Gross Domestic Product (GDP) reading is another early morning report Thursday. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. Last month's preliminary reading revealed that the economy grew at a slightly softer than expected annual rate of 2.0%. Analysts expect to see little change from that first reading. If the revision comes in stronger than the last estimate, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was doing better than thought. Since bonds are more appealing to investors when the economy is weaker, a large downward revision would be good news for mortgage rates.

High

Unknown

Durable Goods Orders

April's Durable Goods Orders report is the third release of the morning, also at 8:30 AM ET. Durable goods are big-ticket products that are made with an expected life span of three or more years, such as airplanes, appliances, and electronics. It is expected to show an increase of 1.7% in new orders, indicating the manufacturing sector strengthened last month. This data is generally known to be quite volatile from month to month. Therefore, a small variance from forecasts will likely have a minimal impact on mortgage rates. By theory, the smaller the increase in orders, the better the news it is for rates.

Low

Unknown

New Home Sales

Closing out this week’s economic calendar is the release of April's New Homes Sales figures at 10:00 AM ET Thursday. This is easily the least influential report of the week since it covers such a small portion of the housing sector. The Existing Home Sales report that was posted earlier this month gives us much more insight into the status of the sector. This version tells us just the number of sales of newly built homes, not resales. Analysts are expecting to see a decline in sales due to the noticeable increase in rates last month. Favorable news for rates would technically be a large decline in sales, but we are not expecting the report to have an impact on rates, especially since it is preceded by several reports that carry much more influence in the markets.

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Unknown

none

Overall, Thursday is the most important day of the week for rates due to the number and significance of the reports being released that day. However, we should also see a big move Tuesday morning after the markets have opened following the extended weekend and are able to digest the Iran news that has raised optimism the end of the war is nearing. There is little doubt that we will see plenty of movement in the markets and mortgage pricing again this week. Therefore, it would be prudent to keep an eye on the markets if still floating an interest rate.

We would like to take this opportunity to wish you and yours a safe and wonderful Memorial Day holiday and to remember those who made the ultimate sacrifice for our country.

Float / Lock Recommendation

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float 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.