Rate Lock Advisory

Tuesday, November 26th

Tuesday’s bond market has opened in negative territory following conflicting economic headlines. Stocks are mixed with the Dow down 255 points and the Nasdaq up 71 points. The bond market is currently down 6/32 (4.29%), which should erase yesterday’s late gains to bring mortgage rates back to Monday’s early pricing. If you saw an intraday improvement in rates yesterday afternoon, you should see an increase in this morning’s rates of about the same size.

6/32

Bonds

30 yr - 4.29%

255

Dow

44,481

71

NASDAQ

19,125

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Negative

Consumer Confidence Index

This week’s economic calendar began late this morning when November's Consumer Confidence Index (CCI) was posted. The Conference Board announced a reading of 111.7, up from October’s revised 109.6. The increase means surveyed consumers felt better about their own financial situations this month than last month and are likely to spend more. While the actual reading fell just short of expectations, the multiple-point increase raises concern that consumer spending may surge, leading to stronger overall economic growth that makes bonds less appealing to investors. Accordingly, we are labeling the report bad news for mortgage rates.

Low

Positive

New Home Sales

Also released late this morning was October's New Home Sales report that showed the sales of newly constructed homes plunged 17.3% last month. This was a significantly larger decline than was expected and points to weakness in the new home portion of the housing sector. As a sign of weakness in the economy, the data is technically good news for rates. Unfortunately, this report covers such a small portion of all home sales in the U.S. that it doesn’t carry much importance to bond traders. The confidence data is driving this morning’s trading, not this report.

Medium

Unknown

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

We also have two afternoon events to watch this afternoon as they may cause a slight revision in mortgage pricing. First is the 1:00 PM ET results announcement of today’s 5-year Treasury Note auction. If the benchmarks point towards a strong demand from investors, we could see bond prices rise and yields move lower. Mortgage rates tend to track bond yields, so good news for rates would be a strong auction. On the other hand, a lackluster interest in the securities could lead to afternoon weakness in bonds and an upward revision to rates.

Medium

Unknown

FOMC Meeting Minutes

Today’s second afternoon event will be the release of the minutes from this month’s FOMC meeting at 2:00 PM ET. Traders will be looking for any indication of what the Fed is considering doing at next month's meeting. It wasn’t too long ago that the markets were widely expecting another quarter-point rate cut as the year came to a close. However, a stall in the downward trend in inflation, other economic factors and the election results now have created much more debate about what they will do. Traders are looking for any hints of what they may do next month. Good news would be confirmation that another quarter-point reduction will be made.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

Tomorrow morning has plenty being released with four economic reports set to be posted, followed by results of the day’s 7-year Note auction at 1:00 PM ET. The day’s activities begin with the release of last week’s unemployment figures at 8:30 AM ET. They are normally posted early Thursday mornings, but will come tomorrow this week due to the Thanksgiving holiday Thursday. Predictions show 217,000 new claims for jobless benefits were made, up from the previous week’s 213,000 initial filings. The higher the number, the better the news it is for bonds and mortgage rates.

High

Unknown

Durable Goods Orders

October's Durable Goods Orders report is also set for release at 8:30 AM ET tomorrow. This data helps us measure manufacturing strength by tracking orders for big-ticket items or products that are expected to last three or more years, such as airplanes, appliances and electronics. It is expected to show a 0.4% rise in new orders. A large decline would be considered good news for the bond market and mortgage rates as it would be a sign the manufacturing sector was softer than thought. We need to see a sizable variance from forecasts for the markets to have a noticeable reaction due to the usual volatility in the data.

Medium

Unknown

GDP Rev 1 (month after initial)

The first revision to the 3rd Quarter Gross Domestic Product (GDP) reading is next. Last month's preliminary estimate of a 2.8% annual rate of growth is expected to be left unchanged. The GDP measures the total of all goods and services produced in the U.S., making it the benchmark measurement of economic growth. Good news for rates would be a downward revision, meaning the economy was not as strong as previously thought. However, this data is somewhat aged at this point covering the July, August and September months. That means it will take a large revision to cause a noticeable move in rates.

High

Unknown

Personal Income and Outlays

Closing out this week’s economic data will be October's Personal Income and Outlays data at 10:00 AM ET, which will give us an indication of consumer ability to spend and their current spending habits. It also includes inflation readings (PCE index) that the Fed relies on heavily when making their monetary policy decisions. The bond market tends to thrive in weaker economic conditions, so good news for mortgage rates would be softer than expected readings, particularly in the PCE readings. Current forecasts show a 0.3% increase in income and a 0.4% rise in spending. Analysts are expecting the overall and core PCE readings to have increased 0.2% and 0.3% respectively and annual readings to have risen slightly. This report will likely have the biggest influence on tomorrow’s mortgage rates.

Low

Neutral

Holiday Schedule

The financial markets will be closed for the Thanksgiving holiday Thursday. Tomorrow will be a full trading day for the stock and bond markets, but we should see thin or light trading during afternoon hours as many market participants and staff head home for the holiday. That will likely be the case Friday also when the markets are open for a shortened day.

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.