Rate Lock Advisory

Thursday, October 29th

Thursday’s bond market has opened in positive territory even though this morning’s economic data leaned towards the unfavorable side more than favorable. Stocks are contributing to this morning’s bond gains by posting losses of 189 points in the Dow and 397 points in the Nasdaq after disappointing earnings news last night from technology companies. The bond market is currently up 7/32 (4.98%), reversing yesterday’s post-FOMC meeting losses and then some. This should allow this morning’s mortgage rates to be approximately .250 of a discount point lower than Wednesday’s early pricing. If you saw an intraday increase in rates after the FOMC events yesterday, you should see a larger improvement this morning than those who did not get a revision.

7/32

Bonds

30 yr - 4.98%

189

Dow

52,286

397

NASDAQ

26,151

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High

Negative

Gross Domestic Product (GDP)

The initial 3rd Quarter Gross Domestic Product (GDP) reading was posted at 8:30 AM ET this morning, revealing the U.S. economy grew at a 3.4% annual rate during the July through September months. This was a bit stronger than the 3.1% that was predicted, making the headline number bad news for bonds and mortgage rates. A secondary reading that is related to inflationary pressures also posted a larger than forecasted increase. Because bonds tend to thrive in weaker economic conditions, we have to label the report bad news for bonds and mortgage rates.

Medium

Positive

Personal Income and Outlays

September's Personal Income and Outlays report was also released at 8:30 AM ET this morning. It showed income rose 0.2% last month while spending jumped 0.5%. Analysts were expecting to see increases of 0.3% and 0.5% respectively. The slightly softer rise in income is technically good news for bonds, but not enough to take attention away from the other readings that were released this morning.

High

Neutral

Inflation News

The Personal Consumption Expenditures (PCE) indexes in the income and spending data failed to give us any big surprises. The overall PCE rose 0.5% last month while the more important core data that excludes volatile food and energy costs was up 0.3%. Both readings pegged expectations for the month. On an annual basis, both readings rose from August’s levels to indicate inflation was stronger last month than the previous month. Since the Fed heavily relies on these readings as their inflation gauges and uses them when making monetary policy decisions, we are labeling them neutral to slightly negative for rates.

Low

Negative

Weekly Unemployment Claims (every Thursday)

The third release of the morning was a non-factor in today’s early mortgage rates. Last week’s unemployment update showed 194,000 new claims for jobless benefits were made, down slightly from the previous week’s revised 195,000. Forecasts had the figure coming in at 198,000 initial filings, so the data is a sign that the employment sector was a little stronger than expected last week. Fortunately, this is just a weekly snapshot that came at the same time some other highly influential data was also posted. We need to consider this report bad news for rates, but with no impact on today’s pricing.

Low

Unknown

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

We also have a 7-year Treasury Note auction taking place today. Results of the sale will be announced at 1:00 PM ET. Good news for rates would be the benchmarks indicating there was a strong demand from investors. However, these are short-term securities and mortgage rates are based on long-term debt. In other words, don’t expect the sale to cause a noticeable revision in rates because it doesn’t carry the same influence as other sales do that we go through each month.

Medium

Unknown

Employment Cost Index (Quarterly)

This week’s economic calendar comes to a close early tomorrow morning with the release of the 3rd Quarter Employment Cost Index (ECI). This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raise wage inflation concerns and hurts bond prices. It is expected to show an increase in costs of 0.8%. A smaller than expected increase would be good news for mortgage rates.

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.