Rate Lock Advisory

Thursday, May 30th

Thursday’s bond market has opened in positive territory following favorable economic news. Stocks are showing more losses with the Dow down 365 points and the Nasdaq down 52 points. The bond market is currently up 12/32 (4.56%), which should improve this morning’s mortgage rates by approximately .125 of a discount point. Restricting this morning’s improvement is weakness in bonds from late yesterday. If you saw rates revised higher yesterday afternoon, you should see a better improvement this morning.

12/32


Bonds


30 yr - 4.56%

365


Dow


38,075

52


NASDAQ


16,868

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Low


Negative


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

Yesterday’s 7-year Treasury Note auction pretty much followed suit of Tuesday’s 5-year Note sale, drawing a below average demand. The 1:00 PM ET results announcement had little impact on bond trading and mortgage pricing. Bonds had already slipped from early morning levels before the auction results were made available. It appears that bond traders were not surprised by the lackluster interest in the securities.

Medium


Neutral


Fed Beige Book

Also released late yesterday was the Fed’s Beige Book report. It showed business contacts in 10 of the Fed’s 12 regions reported slight or modest growth in economic activity. On the inflation front, many businesses are saying consumers are pushing back on rising costs, causing businesses to offer discounts or reduce profit margins by lowering prices. In general, there were no major surprises in the report, making it a non-factor for mortgage rates.

Medium


Positive


GDP Rev 1 (month after initial)

The first of this morning’s two relevant economic reports showed the U.S. economy grew at a 1.3% annual rate during the first three months of the year, down from the initial estimate of 1.6%. This was a larger downward revision than was expected, indicating the economy was softer than thought. Since bonds tend to thrive in weaker economic conditions, this was good news for the bond market and mortgage rates.

Medium


Positive


Weekly Unemployment Claims (every Thursday)

Last week’s unemployment figures were also posted early this morning, revealing 219,000 new claims for benefits were made. This was an increase from the previous week’s revised 216,000 initial filings and slightly higher than expected. Rising claims are a sign of a weakening employment sector, so we can label the report good news for mortgage rates.

Medium


Unknown


Personal Income and Outlays

The week’s calendar closes tomorrow with the most important release of the week. We will get April's Personal Income and Outlays report at 8:30 AM ET. This report gives us an indication of consumer ability to spend and current spending habits. A decline in income means that consumers have less money available to spend. Since consumer spending makes up over two-thirds of our economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts show a 0.3% increase in the income reading while spending rose 0.4%.

High


Unknown


Inflation News

Tomorrow’s report also includes the Fed’s preferred inflation readings (PCE and core PCE indexes). Weaker numbers would be considered good news for bonds and mortgage rates, but the PCE readings will draw much more attention than the income and spending numbers, likely drawing a stronger reaction in the bond market.

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.


Ruidoso Mortgage