Rate Lock Advisory

Thursday, April 26th

Thursday’s bond market has opened well in positive territory despite strong stock gains and mixed economic data. The Dow is currently up 168 points while the Nasdaq has gained 96 points. The bond market is currently up 13/32 (2.98%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.

13/32

Bonds

30 yr - 2.98%

168

Dow

24,252

96

NASDAQ

7,100

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 (5,7,10,30 year securities)

Yesterday’s 5-year Treasury Note auction went relatively well, but not overly strong. A couple benchmarks we use to gauge investor demand indicated interest in the securities while others we less favorable. The bond market didn’t have much of a reaction the news yesterday afternoon. We will be watching today’s 7-year Note auction also. Results of it will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading. A stronger demand for the securities may help boost bond prices later today, possibly leading to a slight improvement in mortgage pricing.

High

Neutral

Durable Goods Orders

There were two pieces of economic data posted at 8:30 AM ET today with the more important being March's Durable Goods Orders. The Commerce Department announced a 2.6% increase in new factory orders for big-ticket products. That exceeded forecasts of 1.9%, but the good news came in a secondary reading that excludes more costly and volatile transportation-related orders (airplanes). It came in unchanged when analysts were expecting to see a 0.6% rise. The headline number isn’t favorable, however, the ex-transportation reading is. Therefore, we can consider the data to be neutral-to-slightly negative for bonds and mortgage rates.

Low

Negative

Weekly Unemployment Claims (every Thursday)

Today’s second release was last week’s unemployment figures that revealed 209,000 new claims for unemployment benefits were filed, falling short of the 225,000 that was expected. It also was a sizable decline from the previous week’s revised 233,000 initial filings, hinting that the employment sector was a bit stronger than thought last week.

High

Negative

Gross Domestic Product (GDP)

Tomorrow has three economic reports set for release. The big news will come at 8:30 AM ET, when the preliminary version of the 1st Quarter Gross Domestic Product (GDP) will be posted. There is a strong argument to be made that this is the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measure of economic growth or contraction. I expect this report to cause noticeable movement in the financial markets and therefore, the mortgage market also. Analysts are expecting it to show that the economy grew at an annual rate of 2.1% during the first three months of this year. That would be a much slower pace than the 2.9% pace of the final quarter of last year. A weaker rate of growth would be considered good news for mortgage rates. But a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates tomorrow morning.

Medium

Unknown

Employment Cost Index (Quarterly)

Also early tomorrow is the 1st Quarter Employment Cost Index (ECI). This index tracks employer costs for wages and benefits, giving us a measurement of wage-inflation. If it shows a large increase, we may see wage inflation concerns rise as employers will need to pass those increases into the pricing of their products and services. That would be bad news for bonds and mortgage rates. A smaller than expected increase would be good news, although I doubt this report will affect mortgage rates because the GDP is a key piece of data and will draw the most attention. Current forecasts are showing a rise of 0.7%.

Medium

Unknown

University of Michigan Consumer Sentiment (Rev)

The week closes with the University of Michigan's revised Index of Consumer Sentiment for April just before 10:00 AM ET. This report gives us an indication of consumer sentiment and their willingness to spend. Current forecasts are calling for little change from the preliminary reading of 97.8. This means that surveyed consumers were no more or less optimistic about their own financial situations as they were earlier this month. I don't expect this report to have a significant impact on bonds and mortgage pricing either, but can cause a small move if it shows a noticeable revision.

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... 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.