Wednesday, July 29th
WEDNESDAY AFTERNOON UPDATE: This week’s FOMC meeting has adjourned with an announcement that key short-term interest rates were left unchanged for the fifth consecutive meeting, matching the consensus. However, the vote to do this was split with three of the twelve members dissenting because they felt a quarter-point increase was needed to help prices/inflation move closer to the Fed’s preferred annual rate of 2.0%.
6/32
Bonds
30 yr - 4.63%
692
Dow
52,054
59
NASDAQ
24,935
Trailing 90 Days - National Average
High
Neutral
We have seen a minor reaction in the markets so far. The Dow is still posting a sizable loss of 692 points, but the Nasdaq has moved into positive territory, now up 59 points. The bond market is currently down 6/32 (4.63%), slightly improving from this morning’s level. It doesn’t appear that is enough of a move to affect rates, at least not yet. There still is some time for a change if Chairman Warsh says something unexpected in his press conference.
Medium
Unknown
We have three pieces of economic data coming early tomorrow morning with two of them considered to be highly important for the financial and mortgage markets. First will be June's Personal Income and Outlays report that is predicted to show a 0.3% rise in income and an increase of 0.4% in spending. Rising income means consumers have more money to spend, fueling economic growth. Therefore, weaker than expected readings would be considered good news for rates.
High
Unknown
However, what makes the income and spending report so important to the markets are the Personal Consumption Expenditures (PCE) indexes in it. These are the Fed's preferred inflation readings and draw plenty of attention. The overall PCE is expected to have slipped 0.1% for the month while the more closely watched core PCE is predicted to rise 0.2%. Good news for bonds and mortgage rates will be smaller than expected increases, particularly in the annual PCE readings. Stronger inflation figures will likely lead to bond selling and higher mortgage rates tomorrow.
High
Unknown
Tomorrow’s second highly important release is the preliminary reading of the 2nd GDP reading. This index is considered to be the benchmark indicator of economic growth or contraction. It is the total of all goods and services that are produced in the U.S. and usually has a strong impact on the financial markets. Current forecasts estimate the economy grew at an annual rate of 2.3% during the April through June months after a 2.1% pace over the first three months. A stronger GDP number would be bad news for rates since it would mean the economy was stronger than thought and bonds tend to thrive in weaker economic conditions.
Medium
Unknown
Last week’s unemployment figures will also be posted early tomorrow morning. They are expected to indicate 204,000 new claims for jobless benefits were filed, up from the previous week’s 187,000 initial filings. Rising claims are a sign of weakness in the employment sector, so the higher the number tomorrow the better the news for rates. That said, the other two reports will have a much stronger influence on the bond market and mortgage rates than this weekly update will.
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.