Rate Lock Advisory

Sunday, May 20th

This week brings us the release of four pieces of economic data that may impact mortgage rates in addition to two Treasury auctions and the minutes from the latest FOMC meeting. None of the events are considered key or expected to be a market mover, but most of the reports carry enough importance to affect mortgage pricing if they show a decent sized variance from forecasts. There is nothing set for release tomorrow or Tuesday.

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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


New Home Sales

The first release of the week will be April's New Home Sales report at 10:00 AM ET Wednesday. This data gives us a small measurement of housing sector strength and future mortgage credit demand but probably will not have much of an impact on mortgage pricing unless it shows a sizable variance from forecasts. Analysts are expecting to see a decline in sales from March's level, meaning the new home portion of the housing sector softened last month.

Medium


Unknown


Federal Open Market Committee (FOMC) Minutes

The day's other two events will come during afternoon trading. One is the minutes of the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns or economic growth. The goal is to form opinions about the Fed's next move regarding interest rates, which is expected to come at next month’s meeting. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during mid-afternoon trading Wednesday.

Medium


Unknown


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

Also Wednesday is the first of this week's two Treasury auctions that are worth watching. The Fed will auction 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors, bringing more funds into bonds. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours Wednesday and Thursday.

Medium


Unknown


Existing Home Sales from National Assoc of Realtors

The National Association of Realtors will give us Thursday's only monthly report when they post their Existing Home Sales report at 10:00 AM ET. As with its sister report (New Home Sales), this data will also give us a measurement of housing sector strength demand but tracks resales of existing homes in the U.S. This type of data is relevant because a weakening housing sector makes broader economic growth less likely. Current forecasts are calling for a decline in home sales between March and April. Ideally, the bond market would prefer to see a large decline, indicating housing sector weakness. A large increase in sales could lead to bond weakness and a slight increase in mortgage rates Thursday morning since a strengthening housing sector raises optimism about general economic growth.

High


Unknown


Durable Goods Orders

Friday has two economic releases scheduled, including the week’s most important report. April's Durable Goods Orders at 8:30 AM ET is the important release. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. These are items made with an expected life span of three or more years such as airplanes, appliances and electronics. It is currently expected to show a decline in new orders of approximately 1.6%, hinting that the manufacturing sector weakened last month. That would be relatively good news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts will likely have little impact on Friday's mortgage rates. The larger the decline, the better the news it is for mortgage rates.

Medium


Unknown


University of Michigan Consumer Sentiment (Rev)

The last mortgage-related data of the week will come from the University of Michigan late Friday morning when they update their Index of Consumer Sentiment for May. This type of data is watched fairly closely because when consumers are feeling more confident about their own financial situations, they are more likely to make a large purchase in the near future. Rising confidence and the higher levels of spending that usually follow are considered negative news for bonds and mortgage rates. Friday's report is expected to show no change to this month's preliminary reading of 98.8. A higher reading would be considered bad news for bonds and mortgage pricing while a large decline should help boost bond prices and lead to a slight improvement in rates.

Medium


Unknown


Bond Trends

Friday is the most important day of the week with three pieces of data being released, but Wednesday may also be pretty active. The least important day will probably be tomorrow or Tuesday. Last week's bond volatility pushed the benchmark 10-year Treasury yield above level of 3.0%, closing at 3.06%. This was the highest we have seen in almost 7 years, bringing mortgage rates upward also. There is nothing set this week that is likely to rally bonds enough to break below 3.0%. That leaves us in a position that means mortgage rates are at risk of moving higher before they move much lower. Therefore, please proceed cautiously if still floating an interest rate and closing in the near future.

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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