Rate Lock Advisory

Thursday, December 12th

Thursday’s bond market initially opened relatively flat but in the past 30 minutes has tanked following another tweet from President Trump that indicated a trade deal with China was near. Stocks are showing the same pattern this morning, opening calm but now are showing strong gains. The Dow is currently up 244 points and the Nasdaq is up 71 points. The bond market is currently down 21/32 (1.86%), which will erase all of yesterday’s post-FOMC gains to keep this morning’s mortgage rates close to Wednesday’s early levels. Bonds rallied yesterday afternoon, causing some lenders to improve rates before the end of the day. If you did see an intraday revision, you will almost certainly see an increase in this morning’s pricing.

21/32


Bonds


30 yr - 1.86%

244


Dow


28,155

71


NASDAQ


8,725

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High


Positive


Producer Price Index (PPI)

November's Producer Price Index (PPI) was posted at 8:30 AM ET this morning, revealing weaker than expected readings. The overall index was unchanged from October’s level while the more important core data that excludes food and energy costs fell 0.2%. Both readings were expected to rise 0.2%, meaning inflationary pressures at the producer or manufacturing level of the economy were softer than many had though. Because inflation makes bonds less attractive to investors, this was good news for mortgage rates.

High


Negative


Geopolitical/Financial Issues

Unfortunately, President Trump’s tweet made the data insignificant this morning. With the additional trade tariffs on Chinese goods set to go into effect this weekend, news of a deal nearly being completed is heavily influencing the financial and mortgage markets. A trade deal is believed to be good for economic growth that, by default, makes it bad news for bonds and mortgage rates. It is worth noting that we have seen plenty of tweets, comments and other messages on this topic that indicated a deal was close and also far away. The expected knee-jerk reaction this morning is taking place, but if a deal does not transpire and the additional tariffs go into place, we will likely see the markets move in a way that quickly reverses this morning’s losses.

Medium


Unknown


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

We have the 30-year Bond auction taking place today that may have an impact on rates this afternoon. Results of the sale will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading. Tuesday’s 10-year Note sale went fairly well and allowed us to be optimistic about the 30-year Bond sale. However, this morning’s turnaround in bonds changes that thought process. If investor demand for the securities is strong, we could see an improvement in bond prices and mortgage rates later today. On the other hand, a lackluster interest could fuel further bond losses and a possible upward revision to rates this afternoon.

High


Unknown


Retail Sales

Tomorrow brings us another important economic report with the release of November's Retail Sales data at 8:30 AM. It will give us a very important measurement of consumer spending. This data is highly important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Strong levels of consumer spending raises the possibility of seeing solid economic growth. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in retail sales will likely drive bond prices lower and mortgage rates higher tomorrow. Analysts are expecting to see an increase of 0.5% in November's sales. Favorable results for mortgage rates would be a smaller increase, meaning consumers spent less than thought.

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.


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