Rate Lock Advisory

Sunday, February 22th

This week has far fewer scheduled events that have the potential to affect mortgage rates than last week. We have only three monthly economic reports set for release and only one is considered to be highly important. In addition to the data there also are a couple of Treasury auctions that could come into play during afternoon trading midweek. We are also on alert for potential geopolitical headlines, specifically regarding tariffs and/or Iran.

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Bonds

Market Closed

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Dow

Market Closed

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NASDAQ

Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Low

Unknown

Fed Talk

There are quite a few Fed-member speeches scheduled throughout the week. Most of them have mundane topics that the bond market rarely reacts to such as technology in the banking system, financial oversight and other topics unrelated to mortgage rates. The speaking event that stands out as most likely to draw some attention is a speech by Fed Governor Waller early tomorrow morning that has a topic listed as Economic Outlook. This means there is a heightened possibility of his words impacting tomorrow’s rates.

Medium

Unknown

Factory Orders

December’s Factory Orders report will start this week’s economic calendar at 10:00 AM ET tomorrow. This report tracks new orders at U.S. factories for durable and non-durable goods, giving us an indication of manufacturing strength. It is expected to show a 1.1% increase in new orders, following November’s 2.7% rise. Weaker than expected manufacturing activity makes bonds more attractive to investors and often leads to lower mortgage rates. However, this data is a bit aged now and a good portion of it was already released in last week’s Durable Goods Orders report. Therefore, we are unlikely to see a strong reaction to tomorrow’s report regardless of what it reveals.

Medium

Unknown

Consumer Confidence Index

February's Consumer Confidence Index (CCI) from the Conference Board will be next, set for release Tuesday at 10:00 AM ET. If consumers are feeling good about their own financial and employment situations, they are more apt to make large purchases in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, related data is considered important in terms of gauging economic growth. It is expected to show an increase from January's 84.5, meaning surveyed consumers felt better about their finances this month than they did last month and are more likely to spend. Good news for rates would be an unexpected decline in the index.

Low

Unknown

Domestic Political Issues

President Trump’s State of the Union address is scheduled for Tuesday evening, long after the markets have closed for the day. We sometimes do see a minor or moderate reaction to these speeches the day after. However, if there is one, it is always just a short-term knee-jerk reaction and not the beginning of a long-term trend in either direction. In other words, we may see the bond market and mortgage rates react modestly to something said in his speech, but it will likely be short-lived and not have a lasting impact on rates.

Medium

Unknown

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

There is no relevant economic data scheduled for release Monday, leaving Tuesday evening’s speech to set the tone for the morning. The first of this week’s two Treasury auctions that we will be watching is taking place Wednesday though. 5-year Notes are being sold that day, followed by 7-year Notes Thursday. Neither of these sales will directly move mortgage pricing, but they can influence general bond market sentiment. If the auctions go poorly with a lackluster demand from investors, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and brings additional funds into the bond market. This often translates into lower mortgage rates. Results will be posted at 1:00 PM ET each auction day, so look for any reaction to come during early afternoon hours.

High

Unknown

Producer Price Index (PPI)

With no data set for release Thursday other than the weekly unemployment update, attention will turn to Friday’s important inflation report. We will get January’s Producer Price Index (PPI) at 8:30 AM ET Friday that measures inflation at the wholesale level of the economy. Its’ sister release (Consumer Price Index) showed two weeks ago that inflation was softer than expected last month. However, last Friday’s Personal Consumption Expenditure (PCE) indexes indicated inflation as hotter than predicted in December. These are different readings from different reports with varying formulas. Still, some consensus on which direction inflation is moving would be extremely helpful in predicting what the Fed may or may not do and which direction mortgage rates are headed. Forecasts have January’s overall and core readings both up 0.3%. Good news for rates would be smaller increases, especially on an annual basis.

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Unknown

none

Overall, Friday is likely to be the most active day for rates because of the importance inflation data carries in the markets. The calmest day may be Wednesday unless something unexpected happens. Despite a very busy calendar last week, there were a couple days that mortgage rates barely budged from the previous day. Don’t be surprised to see that happen again more than one day this week with a relatively light schedule of relevant events.

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.


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