Rate Lock Advisory

Wednesday, September 10th

Wednesday’s bond market has opened in positive territory following favorable inflation news. Stocks are mixed again with the Dow down 62 points and the Nasdaq up 106 points. The bond market is currently up 5/32 (4.06%), but weakness in bonds late yesterday is going to keep this morning’s mortgage rates close to yesterday’s early pricing. If you saw an intraday increase in rates yesterday afternoon, you should see an increase this morning of the same size.

5/32

Bonds

30 yr - 4.06%

62

Dow

45,649

106

NASDAQ

21,986

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)

This morning’s big news was the release of August's Producer Price Index (PPI) at 8:30 AM ET. It revealed that wholesale inflation was much softer than expected last month, contradicting July’s data that showed an unexpected spike. Both the overall PPI and core readings fell 0.1% when they were expected to be up 0.3%. The annual numbers also came in much weaker than expected with the overall at a 2.6% pace and core data running at 2.8%. Analysts predicted annual rates of 3.3% and 3.5% respectively. These were nice improvements, even though July’s monthly numbers were revised lower than previously estimated.

Medium

Positive

Inflation News

We can easily label the PPI data to be bond and mortgage rate friendly since slowing inflation makes bonds more attractive to investors. It also raises the possibility of the Fed making a half-point rate cut next week, assuming tomorrow’s version of this data doesn’t show an unwanted surprise. That said, it is a bit surprising that we have not seen a stronger positive reaction to this morning’s data, especially considering the huge negative response we saw when July’s readings were posted.

Medium

Unknown

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

Later today we will get the results of the 10-year Treasury Note auction. This sale will give us an indication of investor interest in long-term debt, which is relevant because mortgage rates are based on long-term securities. If the 1:00 PM ET announcement shows a strong demand for the securities, we should afternoon strength in bonds that possibly leads to a minor improvement to mortgage rates. On the other hand, a lackluster interest may contribute to an upward revision in rates before the end of the day. This scenario will be repeated tomorrow when 30-year Bonds are sold.

High

Unknown

Consumer Price Index (CPI)

Tomorrow brings us another major inflation reading and the weekly unemployment update, both coming at 8:30 AM ET. We will get August’s Consumer Price Index (PPI) that will tell us what inflation is doing at the more important consumer level of the economy rather than the wholesale level. Some analysts fear that July’s jump in wholesale inflation will trickle down to consumers last month. Analysts are expecting to see a 0.3% increase in both the overall and core readings. Stronger than expected readings would be bad news for rates and could alter what the Fed does next week. However, weaker than predicted readings should boost the possibility of the Fed making a half-point cut to key rates instead of just a quarter-point.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

Last week’s unemployment update is expected to show 234,000 new claims for jobless benefits. This would be a decline from the previous week’s 237,000 to hint at modest strength in the employment sector. Good news for bonds and mortgage rates would be a large increase in initial filings. However, because this is just a weekly snapshot, the CPI data will likely draw much more attention in the markets than this report.

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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