Rate Lock Advisory

Wednesday, July 16th

Wednesday’s bond market has opened in positive territory after relief of some favorable inflation data. Stocks are mixed again with the Dow up 40 points and the Nasdaq down 42 points. The bond market is currently up 9/32 (4.45%), which should erase yesterday’s late selling and keep this morning’s mortgage rates close to Tuesday’s early pricing. If you saw an intraday increase yesterday afternoon, you should see an improvement this morning of approximately the same amount.

9/32

Bonds

30 yr - 4.45%

40

Dow

44,063

42

NASDAQ

20,635

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High

Negative

Producer Price Index (PPI)

This week’s second major piece of economic data was this morning’s release of June’s Producer Price Index (PPI) at 8:30 AM ET. It revealed wholesale inflation was flat last month with both the overall and core readings posting no change from May’s revised levels. The headline monthly numbers appear to be very good news because analysts were expecting them both to be up 0.2%. But upward revisions to May’s readings of 0.2% and 0.3% respectively, means that June wasn’t as favorable as the headlines make it appear. If May’s revisions are taken into consideration, the overall reading was close to forecasts and the core data was slightly stronger than thought.

High

Positive

Inflation News

However, we did get good news in the annual numbers, which were not revised higher for May. The overall annual rate of wholesale inflation dropped from 2.6% in May to 2.3% last month when forecasts had it at 2.5%. The more important core data that excludes volatile food and energy prices dropped from 3.0% to 2.6%. It is these year-over-year declines that are fueling this morning’s bond gains.

Medium

Negative

Industrial Production

June's Industrial Production report was posted at 9:15 AM ET this morning. It indicated output at U.S. factories, mines and utilities rose 0.3% last month. This was stronger than the 0.1% that was expected and on top of a 0.2% upward revision in May’s output numbers to hint manufacturing activity was slightly stronger than thought over the past two months. Fortunately, this morning’s inflation data carries much more significance in the markets than this report, preventing a negative reaction to the news.

Medium

Unknown

Fed Beige Book

Today’s third relevant release comes at 2:00 PM ET when the Federal Reserve releases their Beige Book report. The Fed relies heavily on this report’s contents during their FOMC meetings. It details economic activity and conditions throughout the country by Fed region via the eyes of their business contacts. If there are any significant changes in conditions, particularly inflation, employment and overall economic activity since the last update, we could see an afternoon move in the markets and mortgage rates. Signs of slowing economic growth and/or softer inflation would be favorable news for rates.

High

Unknown

Retail Sales

As if we have not seen enough important economic data already this week, we will get more tomorrow with the highly influential Retail Sales report at 8:30 AM ET. This data tracks consumer spending, which makes up over two-thirds of the U.S. economy. Therefore, it draws plenty of attention in the markets. Forecasts show an increase in sales of 0.1 or 0.2% from May’s level. A secondary reading that excludes more costly and volatile auto transactions is predicted to be up 0.3%. Good news for bonds and mortgage rates would be weaker than expected sales figures.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

Also being posted early tomorrow morning, but not nearly as important as the sales data, is last week’s unemployment update. Analysts are expecting to see 234,000 new claims for jobless benefits were made last week. This would be an increase from the previous week’s 227,000 initial filings. Rising claims for unemployment benefits are a sign of weakness in the employment sector, meaning the higher the number tomorrow, the better the news it is for mortgage rates. That said, the sales data is much more likely to drive bond trading and any change to mortgage pricing than this weekly update is.

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.