Rate Lock Advisory

Friday, June 27th

Friday’s bond market has opened in negative territory following stronger than expected inflation data. Stocks are showing early gains with the Dow up 319 points and the Nasdaq up 112 points. The bond market is currently down 9/32 (4.27%), reversing most of yesterday’s late rally. This should leave this morning’s mortgage rates slightly lower than Thursday’s early pricing. If you saw an intraday improvement yesterday afternoon, you should see an increase this morning.

9/32

Bonds

30 yr - 4.27%

319

Dow

43,786

112

NASDAQ

20,280

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Negative

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

Yesterday’s 7-year Treasury Note auction followed suit of its’ sister sale from Wednesday afternoon by drawing mediocre interest at best. The benchmarks pointed to another below-average demand for the securities compared to other recent sales. As with the 5-year Note sale, the results failed to derail afternoon strength in bonds, allowing many lenders to issue an intraday improvement in rates before the end of the day.

Medium

Negative

Inflation News

Today’s big news was the release May’s Personal Income and Outlays report at 8:30 AM ET. However, the readings in title aren’t what make this report so important to the bond market. It is the Personal Consumption Expenditures (PCE) indexes in the report that draw the most attention because the Fed relies heavily on them as their preferred inflation gauges. The overall PCE matched expectations at up 0.1% last month, but the more important core reading rose 0.2% when forecasts had it up only 0.1%.

High

Negative

Inflation News

Results were similar on a year-over-year basis with the overall PCE showing no surprise at a 2.3% annual rate and the core reading coming in at a stronger than thought 2.7% annual pace. The core PCE readings show inflation was slightly stronger than expected last month and over the past year, making this portion of the report bad news for bonds and mortgage rates. It may also prevent the Fed from cutting key short-term rates at next month’s FOMC meeting.

Medium

Positive

Personal Income and Outlays

The other headline numbers in the report were good news for the bond and mortgage markets. Unfortunately, the inflation data carries much more significance in the markets. Personal income was expected to rise 0.3%, but actually declined 0.4%, meaning consumers had less money to spend than they did in April. Not surprisingly, with income falling last month spending did so also. The spending reading was down 0.1%, falling short of the 0.1% increase that was expected. While these numbers were favorable for rates, the stronger inflation readings cause us to label the report slightly negative for mortgage pricing.

Medium

Neutral

Univ of Mich Consumer Sentiment (Rev)

The University of Michigan gave us their revised Index of Consumer Sentiment for June at 10:00 AM ET this morning with an announcement that it stood at 60.7. This was a tad higher than the 60.5 estimate from earlier this month. The higher reading means surveyed consumers felt a little better about their own financial situations than previously thought. Rising confidence usually translates into stronger consumer spending that fuels economic growth. However, this was a minor variance and not enough to cause much concern. Bonds are reacting to the other data and influences this morning, not this report.

High

Unknown

ISM Index (Institute for Supply Management)

Next week doesn’t have a large number of economic reports set for release, but most of what is scheduled is considered to be important to the financial and mortgage markets. They include the new month reports such as the ISM manufacturing index, the ADP private-sector employment data and the almighty monthly governmental Employment report. There is nothing scheduled for Monday, leaving everything to be released over just three days due to the Independence Day holiday next Friday. In addition to the data, Fed Chairman Powell is participating in a public panel discussion about monetary and banking policy in Portugal Tuesday morning. Look for details on all of next week’s activities in Sunday evening’s weekly preview.

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.