Rate Lock Advisory

Sunday, June 21th

This week has five monthly and quarterly economic reports that may influence mortgage rates, two of which are considered to be of upper importance to the markets and may have a stronger impact on rates than the others. In addition to the data there are also a couple of Treasury auctions that may affect rates during afternoon trading midweek. We will also be watching for headlines regarding the Middle East, especially regarding the Strait of Hormuz and if shipping is moving through it that will lower gas prices and ease inflation concerns. The week starts light with nothing of importance scheduled for release tomorrow or Tuesday.

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Bonds

Market Closed

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Dow

Market Closed

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NASDAQ

Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Low

Unknown

New Home Sales

May's New Home Sales report will be the week’s first scheduled event, set for release at 10:00 AM ET Wednesday. This report helps us measure housing sector strength by tracking sales of newly constructed homes. However, it covers such a small portion of all home sales in the U.S. that the report doesn’t carry much influence in the markets. Most home sales are reported in the National Association of Realtor’s Existing Home Sales report. Wednesday’s version is expected to show an increase in new home sales to signal a bit of strength in the sector. Unless there is a significant variance from forecasts, the report will likely have no impact on mortgage rates. A decline in sales would allow the report to be labeled as good news for mortgage pricing.

Medium

Unknown

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

Wednesday also has the first of this week's two Treasury auctions that we will be watching. They both have the potential to affect afternoon bond trading enough to alter rates slightly. The key is how strong investor interest is for the securities. 5-year Notes will be sold Wednesday while 7-year Notes will be auctioned Thursday. If they are met with a strong demand from investors, we could see bond prices rise and mortgage rates improve slightly during afternoon trading midweek. On the other hand, if the sales draw a lackluster interest from investors, mortgage rates may move modestly higher during afternoon hours those days.

Medium

Unknown

Personal Income and Outlays

Thursday is quite busy in terms of scheduled economic releases. In addition to the typical weekly unemployment update, it also has three other early morning reports that we will be watching. The most important of them is May’s Personal Income and Outlays data at 8:30 AM ET. It will give us an indication of consumer ability to spend and current spending activity. The theory is, if consumer income is rising, they have more money to spend each month. Analysts are expecting to see a 0.4% rise in income while spending rose 0.6% during the month.

High

Unknown

Inflation News

The Personal Income and Outlays report also includes important inflation readings that the Fed heavily relies on during their FOMC meetings. Forecasts have the overall Personal Consumption Expenditures (PCE) index up 0.4% for the month while the more important core data that excludes volatile food and energy costs is predicted to rise 0.3%. The year-over-year PCE readings are expected to rise from April’s pace, indicating inflation was stronger last month than it was the month before. Stronger inflation makes long-term securities, such as mortgage bonds, less attractive to investors and may cause the Fed to raise key rates. Therefore, good news for mortgage rates would be noticeable weaker readings.

High

Unknown

Durable Goods Orders

May's Durable Goods Orders report is next in terms of importance level. It will give us an indication of manufacturing sector strength by tracking orders at U.S. factories for products that are expected to last three or more years such as airplanes, appliances and electronics. This data is known to be quite volatile from month to month, so a moderate variance from expectations is not as meaningful as it is in other reports. Forecasts show a decline in orders in the neighborhood of 4.0%. A larger drop would be good news for mortgage pricing.

Low

Unknown

GDP Rev 2 (month after Rev 1)

The second revision to the 1st Quarter Gross Domestic Product (GDP) reading is also set for release at 8:30 AM ET Thursday. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. However, this data is quite aged now (covers January through March) and will likely have little impact on the bond market or mortgage pricing unless it varies greatly from previous readings since market participants are looking more towards next month's release of the current quarter's initial GDP reading. Thursday's update is expected to match the initial revision that the economy grew at a 1.6% annual rate. A large upward revision in the GDP would be considered negative for rates as it means the economy was stronger than thought.

Medium

Unknown

Univ of Mich Consumer Sentiment (Rev)

The University of Michigan will close out this week's data when they update their Index of Consumer Sentiment for June late Friday morning. This index is a sign of consumer willingness to spend. Waning confidence in personal financial and employment situations usually translates into softer levels of consumer spending, restricting economic growth. A large downward revision would be considered good news for bonds and rates. Forecasts show the index coming in near the initial reading of 48.9 from earlier this month.

Medium

Unknown

Fed Talk

We will also start seeing public speaking engagements from Fed members since the FOMC meeting is now behind us. None of them particularly stand out as likely to move the markets or mortgage pricing this week, but any of them can do so. Most of these speeches have mundane topics related to banking rules and technology that draw little attention. Market participants are looking for individual member thoughts about inflation and the likelihood of the Fed making a rate hike before lowering them again. Any speech or public discussion that addresses that topic could affect the financial markets and mortgage rates. Generally speaking, the Fed raising key short-term rates is bad news for bonds and should cause an increase in mortgage rates.

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Unknown

none

Overall, Thursday appears to be the most important day for rates because of the batch of data that day, including the highly important inflation readings. Tuesday could be the calmest day, assuming nothing unexpected happens. With so much scheduled this week and the possible addition of Middle East headlines on top of it, it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future.

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.