Monday, June 15th
Monday’s bond market has opened in positive territory following weekend news about a peace deal with Iran. Stocks are posting strong gains on the same news, pushing the Dow up 521 points and the Nasdaq up 617 points. The bond market is currently up 11/32 (4.43%), which combined with strength late Friday should improve this morning’s mortgage rates by approximately .500 of a discount point compared to Friday’s early pricing.
11/32
Bonds
30 yr - 4.43%
521
Dow
51,724
617
NASDAQ
26,506
Trailing 90 Days - National Average
High
Positive
Yesterday’s announced agreement with Iran is the fuel of this morning’s market gains. It doesn’t resolve all of the issues each side wanted, but most importantly for the bond market, it opens the Strait of Hormuz. This will allow cargo and oil shipments to pass through the strait, eventually bringing energy and gas costs down for consumers. This directly relates to inflation concerns that have caused bond yields and mortgage rates to move higher over the past few months and raised the possibility of a Fed rate hike coming before they lower key short-term rates again.
Medium
Positive
The signing of the agreement is expected to happen later this week, so there is still the chance something could change before then. The agreement isn’t going to end all issues, such as nuclear weapons, but most of those unresolved matters aren’t going to directly affect bond trading and/or mortgage rates either. Fully reopening the Strait of Hormuz is the single most important topic at the moment for the bond market, making this weekend’s headlines very good news for rates.
Medium
Positive
This week’s economic calendar kicked-off this morning with the release of May's Industrial Production data at 9:15 AM ET. It revealed a 0.1% increase in output at U.S. factories, mines and utilities, falling a bit short of the 0.3% that was expected. While this is technically good news for bonds and mortgage rates, it has had no influence on this morning’s pricing. Traders are almost exclusively focused on the Iran war news.
High
Unknown
The remainder of this holiday-shortened week has three more monthly economic reports for the markets to digest, with one being labeled highly important. There are also a few non-data items on the calendar that have the potential to influence mortgage rates, including a Treasury auction and an afternoon of FOMC events. In addition to the scheduled events, we will also be watching for surprise headlines from the Middle East to affect bond trading and mortgage rates.
Low
Unknown
Tomorrow has another economic release that is likely to have little impact on mortgage rates. May's Housing Starts report will be released at 8:30 AM ET, telling us the number of new home groundbreakings. This is not considered to be as important as other housing reports and isn’t expected to cause a noticeable move in mortgage pricing. Market analysts are expecting to see a minor decline in new home construction starts last month. Good news for the bond market and mortgage rates would be a noticeable decline in groundbreakings.
Medium
Unknown
Also tomorrow will be the 20-year Treasury Bond auction. Results of the sale will be posted at 1:00 PM ET, making this an afternoon event for rates. A strong demand for the securities could help improve bonds and lead to slightly lower mortgage rates. However, if the sale draws a lackluster interest, we could see bonds weaken and mortgage rates move higher tomorrow afternoon because mortgage pricing is based on long-term debt.
High
Unknown
Overall, Wednesday is the most important day for rates by default due to FOMC meeting and related events. The fact the Retail Sales report comes that morning also only solidifies the day as the one most likely to have the biggest move in rates. The calmest day could be Thursday, unless something unexpected happens. It would be prudent to keep an eye on the markets if still floating an interest and closing in the near future, especially the middle days of the week.
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.