Rate Lock Advisory

Monday, January 12th

Monday’s bond market has opened in negative territory following weekend political news. Stocks are also in negative ground with the Dow down 185 points and the Nasdaq down 21 points. The bond market is currently down 5/32 (4.19%). Volatility Friday afternoon caused some lenders to improve rates during early afternoon trading, but some then issued an intraday increase in pricing before the week came to a close. Where this morning’s rates are depends on what revisions you saw after morning pricing was issued Friday.

5/32

Bonds

30 yr - 4.19%

185

Dow

49,318

21

NASDAQ

23,650

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Negative

Domestic Political Issues

There is no relevant economic data scheduled for release today. This morning’s negative open in the bond market (and stocks for that matter also) is due to news that broke last night that the Justice Department has opened a criminal investigation into Federal Reserve Chairman Powell regarding his congressional testimony about the massive renovation project of the Fed’s buildings. The problem is that many in the markets believe this is merely political retribution for the Fed not meeting President Trump’s insistence to lower key short-term interest rates more than they have already and not a true case of Chairman Powell breaking the law.

High

Unknown

Misc Fed

This all goes to the importance that the Fed remain completely independent and shielded from political sway. If the Fed loses that reputation of being independent, the markets will also lose confidence in their monetary policy decisions. Accordingly, we are seeing a negative reaction as investors price additional risk into the markets. Unfortunately, this is likely not a single day or one-off move. We could see further responses if this investigation continues, or additional cases are opened against other Fed members.

Medium

Unknown

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

We do have an afternoon event that has the potential to affect rates later today. 10-year Treasury Notes are being sold today with results being announced at 1:00 PM ET. This sale will give us an indication of investor appetite for long-term securities. This is relevant because mortgage rates are based on long-term debt, so a strong demand for the securities could contribute to an improvement in bond prices and mortgage rates this afternoon. However, results that show a lackluster demand from investors may cause an upward revision to rates. This scenario will be repeated tomorrow when 30-year Bonds are sold.

High

Unknown

Consumer Price Index (CPI)

Tomorrow has two of this week’s five monthly economic reports with one being the highly influential December Consumer Price Index (CPI). It will tell us how inflation was at the consumer level of the economy last month. There are two readings in the release, the overall and the core data that excludes more volatile food and energy prices. The overall reading is expected to have risen 0.3% from November and have held at 2.7% year-over-year. More importantly, core data is expected to be up 0.3% for the month and have risen 0.1% annually from November’s 2.6% pace. If this report shows consumer inflation is softer than thought, we should see bonds rally tomorrow morning, pushing mortgage rates noticeably lower. That would also make another Fed rate cut in the near future more of a possibility.

Low

Unknown

New Home Sales

New Home Sales data is tomorrow’s second release. This shutdown-delayed update will cover sales of newly constructed homes in September and October. It usually carries a weak influence on rates because it tracks only a small portion of all home sales in the U.S., but since the data in this week’s release is now aged, we are not expecting to see its results have any impact on rates. The inflation data will certainly drive mortgage rates tomorrow much more than this report will.

---

Unknown

none

Overall, tomorrow is the most important day of the week for rates due to the influence the CPI has on the markets, but we may also see a big move Wednesday with so much information coming, including another inflation index and a key consumer spending report. The calmest day should be Friday unless something unexpected happens. With a packed calendar of relevant events this week, it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future because we are expecting to see quite a bit of volatility, especially the middle days.

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.