Rate Lock Advisory – Wednesday Sept 28

Wednesday’s bond market has opened in negative territory again as investors continue to move funds away from bonds. The stock markets are showing more gains with the Dow up 59 points and the Nasdaq up 2 points. The bond market is currently down 20/32, pushing the yield on the 10-year Treasury Note back above 2.00% (currently 2.04%) for the first time in weeks. However, due to a little strength late yesterday, we should see an increase in this morning’s mortgage rates of only .125 of a discount point.

The Commerce Department released August’s Durable Goods Orders this morning, revealing a 0.1% decline in new orders for big-ticket items. This indicates hints at a flat manufacturing sector last month. Even if larger transportation-related orders were excluded, new orders fell by same amount. Analysts were expecting to see a 0.1% increase in orders, but this data is so volatile from month-to-month that the variance from forecasts is irrelevant to the markets. Therefore, this news is neutral for the bond market and mortgage rates.

Also worth noting about today is the 5-year Treasury Note auction. The recent increase in bond yields could make the securities more attractive to investors than we had expected late last week. If the sale goes well and is met with a strong demand from investors, we could see afternoon strength in the broader bond market and a possible improvement to mortgage rates. Tomorrow’s auction of 7-year Notes are actually closer to mortgage bond terms, but we often see a similar interest level in 5-year and 7-year Notes. This allows the 5-year Notes to influence mortgage rates more than tomorrow’s securities simply because they come first. Results of each sale will be posted at 1:00 PM ET, so any movement in mortgage pricing due to the auction will come during afternoon hours.

Tomorrow does have two pieces of economic data to be released, but neither is considered to be of high importance to the bond market or mortgage pricing. The first is the final revision to the 2nd Quarter Gross Domestic Product (GDP). Since this data is aged now and the preliminary reading of the 3rd Quarter GDP will be released next month, I don’t see this revision having much of an impact on the financial markets or mortgage pricing. The GDP is important in general because it is the total sum of all goods and services produced within the U.S. and is considered the best measurement of economic activity. It is expected to show a 0.2% upward revision to the previous estimate of a 1.0% increase in the GDP. I believe it will take a fairly large revision for this data to move mortgage rates tomorrow.

The second release of the morning will come from the Labor Department, who will give us their weekly update on the employment sector. They are expected to announce that 419,000 new claims for unemployment benefits were filed last week. This would be a decline from the previous week, hinting at a slightly improving labor market. However, since this data tracks only a single week’s worth of new claims, it usually takes a large surprise in the number for it to impact mortgage rates. The larger the number of new claims, the better the news for the bond and mortgage markets.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float 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.

Leave a Reply