Rate Lock Advisory

Thursday, September 28th

Thursday’s bond market has opened in negative territory, continuing yesterday’s late afternoon weakness. Stocks are showing gains of 74 points in the Dow and 16 points in the Nasdaq. The bond market is currently down 9/32 (4.64%), which with yesterday’s late selling should cause a noticeable rise in this morning’s mortgage rates. Most lenders issued an intraday increase in rates as bond selling accelerated yesterday. The increase you will see this morning depends on the size of the change you received Wednesday afternoon. The net difference should have this morning’s rates approximately .500 - .750 of a discount point higher than Wednesday’s early pricing.



30 yr - 4.64%







Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock



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

Yesterday’s 5-year Treasury Note auction drew a decent interest from investors, but not overwhelmingly strong. The results failed to have an impact on bond trading. Bonds had already started to give back morning gains before the results were announced at 1:00 PM ET and the sale wasn’t strong enough to derail that negative momentum. As bond prices fell, pushing yields higher, some lenders revised pricing higher before the end of the day. We have the 7-year Note sale taking place today that could influence afternoon trading and mortgage pricing. A strong demand from investors could help boost bonds and lead to a slight improvement in rates later today.



GDP Rev 2 (month after Rev 1)

This morning’s updated Gross Domestic Product (GDP) reading for the second quarter was unchanged at up 2.1%. This means that the economy grew at an annual 2.1% pace during the April through June months. A secondary reading that is considered to be inflation-related was revised a little lower. That allows us to label the report favorable for rates. However, the data is aged now and the current quarter’s activity will be posted next month, meaning it has not helped this morning’s mortgage rates.



Weekly Unemployment Claims (every Thursday)

Also announced at 8:30 AM ET was last week’s unemployment update. It showed 204,000 new claims for benefits were made last week. This was an increase from the previous week’s revised 202,000 initial filings, but lower than the 215,000 that was expected. Accordingly, we are considering the data to be neutral to slightly negative for rates.



General Bond Trends

It obviously is not only economic data that is driving this week’s bond selling. It is interesting that the Dow was at a 3-4 month low yesterday, while bond yields were at a 16 year high. It seems that stock traders are worried about current events, such the impact a government shutdown will have on the economy, but bond traders are ignoring those same factors. With stocks in a downward trend and the current political environment likely to negatively affect the economy, it is difficult to understand why bond yields and mortgage rates are trending higher rather than lower. Maybe we will see more of a logical reaction when the threat of a shutdown becomes a reality next week.



Fed Talk

Fed Chairman Powell has a public speaking engagement set for 4:00 PM ET today. He is hosting a town hall meeting with educators in person in Washington DC and nationally via webcast. The fact the participating audience are mostly teachers and others in the education field, there isn’t a high expectation of this event moving the markets. That said, any time he speaks, the markets listen and may react accordingly.



Personal Income and Outlays

Tomorrow has the final two reports of the week. The first is August's Personal Income and Outlays at 8:30 AM ET that gives us an indication of consumer ability to spend and current spending habits. This is relevant to the markets because consumer spending makes up such a large part of the U.S. economy. Rising income generally means consumers have more money to spend, making economic growth more of a possibility. That is negative news for mortgage rates because bonds tend to thrive in weaker economic conditions. Forecasts are calling for a 0.5% rise in income and a 0.5% rise in spending. If we see weaker than expected readings, the bond market should react positively, leading to lower mortgage rates. This report also includes the PCE index that the Fed primarily uses for gauging inflation. A surprise in it can also lead to a strong move in mortgage pricing.



Univ of Mich Consumer Sentiment (Rev)

Closing out this week's calendar will be the University of Michigan's revised Index of Consumer Sentiment for September. The preliminary reading that was released earlier this month showed a 67.7 reading. Analysts are expecting to see no change, meaning consumer confidence was as strong as previously thought. Waning confidence is good news for bonds because consumers that are concerned about their own financial and employment situations are less likely to make a large purchase in the near future, limiting economic growth. Therefore, a lower than expected reading would be favorable 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... 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.

Community Home Mortgage

12 S. Grant Street
Roseville, CA 95678