Rate Lock Advisory

Thursday, May 24th

Thursday’s bond market has opened in positive territory again with stocks in selling mode following news that the N. Korea summit has been cancelled. The Dow is currently down 193 points while the Nasdaq has lost 42 points. The bond market is currently up 8/32 (2.96%), which with gains late yesterday should improve this morning’s mortgage rates by approximately .250 of a discount point over Wednesday’s morning pricing.



30 yr - 2.96%







Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock



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

There were two afternoon events yesterday, one of which had a positive impact on bonds and mortgage rates. At 1:00 PM ET we got results of the 5-year Treasury Note auction. They showed a good interest level in the securities but not great. The news had little impact on trading or mortgage rates late yesterday. However, they do allow us to remain fairly optimistic about today’s 7-year Note sale. Results of it will be released at 1:00 PM also, so any reaction will come during early afternoon trading.



Federal Open Market Committee (FOMC) Minutes

The second event was the release of the minutes of the May 1-2 FOMC meeting. They didn’t give us any major surprises but did offer a couple of points that were taken as bond-friendly. Overall, the minutes showed that the economic continues to grow and pretty much cemented another rate hike at their upcoming June 12-13 meeting. The good news came in references that the labor market wasn’t showing signs of overheating and that wage pressures that the markets were concerned about are still only moderately growing. Another statement indicated inflation moving a little over the Fed’s preferred 2.0% annual rate may actually be beneficial. What that implies is that once inflation reached that rate, the Fed may not turn more aggressive with rate hikes, at least not right away. Bonds rallied after the release, breaking below 3.00% and causing some lenders to revise mortgage rates slightly lower intraday yesterday.



Existing Home Sales from National Assoc of Realtors

The National Association of Realtors gave us April’s home sales data late this morning. They announced a 2.5% decline in home resales last month. This was a larger decline than was expected, meaning the housing market was a bit softer than many had thought. That is good news for bonds and mortgage rates because a weakening housing market makes broader economic growth less likely. Although, this is not the reason we are seeing such a positive open in bonds this morning.



Weekly Unemployment Claims (every Thursday)

The weekly unemployment update revealed 234,000 new claims for unemployment benefits were filed last week. This was higher than expected and an increase from the previous week’s revised 223,000 initial filings. Rising claims is a sign of a weakening employment sector, so the increase was good news for mortgage pricing.



Durable Goods Orders

Tomorrow has two economic releases scheduled, including the week’s most important report. April's Durable Goods Orders at 8:30 AM ET is the important release. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. These are items made with an expected life span of three or more years such as airplanes, appliances and electronics. It is currently expected to show a decline in new orders of approximately 1.6%, hinting that the manufacturing sector weakened last month. That would be relatively good news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts will likely have little impact on mortgage rates. The larger the decline, the better the news it is for mortgage rates.



University of Michigan Consumer Sentiment (Rev)

The last mortgage-related data of the week will come from the University of Michigan at 10:00 AM ET tomorrow morning when they update their Index of Consumer Sentiment for May. This type of data is watched fairly closely because when consumers are feeling more confident about their own financial situations, they are more likely to make a large purchase in the near future. Rising confidence and the higher levels of spending that usually follow are considered negative news for bonds and mortgage rates. Tomorrowy's report is expected to show no change to this month's preliminary reading of 98.8. A higher reading would be considered bad news for bonds and mortgage pricing while a large decline should help boost bond prices and lead to a slight improvement in 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... 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.

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