Rate Lock Advisory

Thursday, April 25th

Thursday’s bond market has opened well in negative territory following conflicting information in this morning’s highly important economic release. Stocks are in a sell-off with the Dow down 682 points and the Nasdaq down 283 points. The bond market is currently down 20/32 (4.72%), which should push this morning’s mortgage rates higher by approximately .375 of a discount point.

20/32

Bonds

30 yr - 4.72%

682

Dow

37,778

283

NASDAQ

15,428

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Unknown

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

Yesterday’s 5-year Treasury Note auction didn’t go as well as we had hoped. The benchmarks we use to gauge investor interest in the sale pointed toward a below average demand compared to other recent auctions. The bond market made a move lower (higher yields) shortly after the results were announced at 1:00 PM ET. However, it doesn’t appear to have been enough of a change for lenders to make an intraday increase to mortgage pricing. That reaction is likely being taken into consideration with this morning’s rates. Also, yesterday’s results make it difficult to be optimistic about today’s 7-year Note sale. Results of it will be posted at 1:00 PM ET again, meaning if the auction affects rates, it will do so during early afternoon trading.

High

Negative

Gross Domestic Product (GDP)

This morning’s major news was the initial Gross Domestic Product (GDP) reading and other data for the 1st quarter of the year. The 8:30 AM ET release revealed the U.S. economy grew at an annual rate of 1.6% during the first three months of the year. This was much slower than the 2.4% that was expected and lower than the 4th quarter’s revised 3.9%. While the headline number was clearly good news for bonds, data deep in the report indicated inflation moved higher over that timeframe when it was expected to decline. This is what is fueling this morning’s bond weakness, especially since we will get another similar reading tomorrow morning.

Medium

Negative

Weekly Unemployment Claims (every Thursday)

Last week’s unemployment figures were also posted at 8:30 AM ET this morning. They showed 207,000 new claims for benefits were made last week. 215,000 initial filings were expected, up from the previous week’s 212,000. The lower number of claims is a sign of employment sector strength, making the news unfavorable for bonds and mortgage rates.

Medium

Unknown

Personal Income and Outlays

We have two more reports coming tomorrow with one including a key inflation index that the Fed heavily relies on. That would be March’s Personal Income and Outlays report at 8:30 AM ET. It helps us measure consumer ability to spend and current spending habits. This information is important to mortgage rates due to the influence that consumer spending-related data has on the financial markets. If consumer income is rising, they have the ability to make additional purchases in the near future, fueling economic growth that raises inflation concerns and has a negative impact on the bond market and mortgage rates. Tomorrow’s release is expected to show a 0.5% rise in income and 0.6% jump in spending.

High

Unknown

Inflation News

It is this report that has the very important Personal Consumption Expenditures (PCE) index in it. This part of the report carries more influence than the others, having the potential to cause a big move in bond prices and mortgage rates. The overall PCE and core readings are both expected to rise 0.3% for the month. Year-over-year readings are predicted to rise 2.6% and 2.7% respectively. Smaller increases should help push bond yields and mortgage rates lower tomorrow. That said, recent inflation-related data has not been friendly to our cause. It would be prudent to approach tomorrow’s data cautiously if still floating an interest rate and closing in the near future.

Medium

Unknown

Univ of Mich Consumer Sentiment (Rev)

The week’s calendar closes with the University of Michigan's revised Index of Consumer Sentiment for April at 10:00 AM ET. This report gives us an indication of consumer sentiment and their willingness to spend. Forecasts have the index nearly unchanged from the preliminary 77.9 reading of two weeks ago. This means that surveyed consumers were no more or less optimistic about their own financial situations than they were earlier this month. This data is relevant because waning confidence in their own financial situations usually means consumers are less apt to make a large purchase in the near future. Therefore, the lower the reading, the better the news for 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.

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