Rate Lock Advisory

Sunday, March 3rd

This week has six pieces of monthly and quarterly economic data scheduled for release that may influence mortgage rates in addition to a couple of congressional appearances by Fed Chairman Powell. One of the economic reports is extremely important to the financial and mortgage markets. The week starts light with nothing of importance set for tomorrow.

---


Bonds


Market Closed

---


Dow


Market Closed

---


NASDAQ


Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium


Positive


Factory Orders

Activities will begin late Tuesday morning with the release of two moderately important economic reports. One is December's Factory Orders report that is similar to last week's Durable Goods Orders release in giving us a measurement of manufacturing sector strength. This version includes new orders for both durable and non-durable goods. It is not one of the more important reports we get each month, however, it can influence mortgage pricing if it varies greatly from forecasts. Analysts are expecting a 2.5% decline in new orders, indicating weakness in the manufacturing sector. The bond market would like to see a larger decline, meaning that manufacturing activity was weaker than many had thought.

Medium


Unknown


ISM Service Index

Tuesday’s second report will be February’s non-manufacturing index from the Institute for Supply Management (ISM). This is the sister release to last week’s manufacturing index, tracking executive sentiment about business conditions in the services sector instead of manufacturing. Predictions have the index at 52.7, down from January’s 53.4. A decline would signal more surveyed executives felt business softened than did in January. An increase would be bad news for bonds and mortgage rates.

Medium


Unknown


ADP Employment

Wednesday is going to be an interesting day. It starts at 8:15 AM ET when payroll processor ADP posts their private-sector Employment report. As with any employment-related data, it will draw some attention. This is especially true for this one because it is posted just a couple days before the monthly governmental version is released. Many people feel this report is given more attention than it really deserves, particularly because some use it to predict the monthly government figures but often without success. Still, if it shows a noticeable variance from expectations, it will likely cause movement in the markets and mortgage rates. Forecasts are calling for it to show 150,000 new payrolls. Good news for rates would be a much smaller number.

High


Unknown


Fed Talk

Next up on Wednesday’s schedule is day one of Fed Chairman Powell's two-day semi-annual testimony before Congress. He will be updating the House Financial Services Committee Wednesday morning on the status of the economy and monetary policy, followed by the Senate Banking Committee Thursday morning. There is a good possibility of seeing the markets react to his words, possibly leading to a change in mortgage rates. He will be speaking at 10:00 AM ET both days, but his prepared opening statement is sometimes made available prior to appearance. Generally speaking, we see the strongest reactions on the first day of testimony since the chairperson’s prepared statement usually has few changes the second day.

Medium


Unknown


Fed Beige Book

The Fed Beige Book will close out Wednesday’s activities at 2:00 PM ET. This report details economic activity throughout the country by Federal Reserve region via their business contacts. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during mid-afternoon afternoon trading. It probably will not cause a major sell-off in the stock or bond markets but can fuel a strong enough move to cause a minor intraday revision to rates.

Medium


Unknown


Productivity and Costs (Quarterly)

Thursday is much lighter in terms of events that may affect mortgage rates. We will get the revised Productivity Index for the 4th Quarter of last year at 8:30 AM ET. Analysts are expecting to see an increase of 3.1%, down slightly from the initial estimate of 3.2%. Employee productivity is watched fairly closely because a higher level of output per hour is believed to mean that the economy can growth without inflation concerns. This release also includes a labor costs reading that can be quite influential if it shows a surprise. However, since this data is quite aged now, it likely will have little impact on mortgage rates unless it shows a significant change.

High


Unknown


Employment Situation

Friday has the most important economic release of the week- February's Employment report at 8:30 AM ET. Some of the important readings in the report will give us the unemployment rate, the number of new jobs added or lost and the average hourly earnings change. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller payroll number than expected and little or no increase in earnings. Current forecasts are calling for no change from January’s unemployment rate of 3.7%, approximately 195,000 new jobs added to the economy and a 0.3% rise in earnings. Stronger than expected readings will likely fuel selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would improve the possibility of the Fed making their first rate cut at their May FOMC meeting and likely lead to noticeably lower mortgage rates Friday.

---


Unknown


none

Overall, Wednesday is likely to bring the biggest move in rates with Friday being the next best bet. Chairman Powell’s words to congress will be watched extremely closely Wednesday and after January’s Employment report turned out to be surprisingly strong, traders are anxiously awaiting February’s job numbers to see if last month was just a seasonal blip or if the labor market is really that resilient. The calmest day could be any day except Wednesday and Friday. There is a high probability of seeing big moves in the financial indexes and mortgage rates this week. Therefore, please proceed cautiously of 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... 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.


Southwest Funding #841
Company NMLS # 303440

Your Mortgage Loan Expert

7901 Cameron Road Bldg 2 Ste 246
Austin, TX 78754