Rate Lock Advisory

Friday, February 13th

Friday’s bond market has opened in positive territory to extend yesterday’s afternoon gains. Stocks are much calmer this morning than yesterday, at least for the moment. The Dow is up 36 points while the Nasdaq is down 8 points. The bond market is currently up 9/32 (4.06%), which should improve this morning’s mortgage rates by approximately .250 - .375 of a discount point if compared to Thursday’s early pricing. Many lenders revised rates lower during afternoon trading yesterday, so the size of this morning’s improvement depends on how big of a revision you saw.

9/32

Bonds

30 yr - 4.06%

36

Dow

49,488

8

NASDAQ

22,588

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Positive

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

Yesterday’s 30-year Treasury Bond auction went very well, especially if compared to Wednesday’s 10-year Note sale. The benchmarks from yesterday pointed to a strong investor demand for the securities. Bonds had already improved before the 1:00 PM ET results announcement as stock selling picked up momentum during midday trading. However, another post-announcement move was enough to cause widespread intraday improvements to rates. The auction isn’t the sole reason for the intraday revision to rates, but it certainly contributed to it.

High

Positive

Consumer Price Index (CPI)

This morning’s major economic news was the release of January’s Consumer Price Index (CPI) at 8:30 AM ET. It showed consumer level inflation was a tad softer than expected last month. The overall reading rose 0.2% for the month, falling just short of the 0.3% that was predicted. More important core prices, that exclude volatile food and energy costs, matched forecasts with a 0.3% increase. The annual readings followed the same pattern with the overall CPI dropping more than expected (2.7% to 2.4%) and the core reading pegging forecasts of 2.5% after December was at 2.6%.

Medium

Positive

General Bond Trends

The inflation data is definitely not bad news for bonds and mortgage rates in any way. That said, the markets and the Fed are more responsive to core readings, which didn’t show any pleasant or unfavorable surprises. After yesterday’s late bond rally, it is of no surprise that this morning’s CPI data is fueling more bond gains again today. If it wasn’t for yesterday’s positive momentum, we likely wouldn’t have seen as strong of an open in bonds as we have. This allows us to label the data good news with a favorable reaction in mortgage rates also.

High

Unknown

Gross Domestic Product (GDP)

Next week has plenty of economic reports and other events scheduled that are relevant to mortgage rates. It starts light with the markets closed Monday for the President’s Day holiday and nothing of importance set for Tuesday except a couple of Fed-member speeches. The economic reports start Wednesday morning but the most important will be posted Friday when the initial 4th quarter Gross Domestic Product (GDP) reading and the Fed’s preferred inflation gauges (PCE indexes) are released. In between, there are some moderately influential reports, a good number of Fed speeches, another Treasury auction and the minutes from last month’s FOMC meeting all coming over just a couple of days. Look for details on all of next week’s scheduled activities in Sunday evening’s weekly preview.

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.