Rate Lock Advisory

Sunday, February 15th

This holiday-shortened week brings us plenty of relevant monthly economic reports for the bond market to digest, in addition to a Treasury auction and the FOMC meeting minutes. A couple of the reports are considered to be highly important. The financial markets will be closed tomorrow in observance of the President's Day holiday. Due to the holiday and market closures, this report will not be updated tomorrow.

Tomorrow and Tuesday have nothing happening that we need to be concerned about. Activities begin Wednesday morning with three pieces of economic data scheduled for release, but two of them were delayed by last year’s shutdown and are almost irrelevant at this point. They are the Housing Starts and Durable Goods Orders reports from late last year. We will first get November and December’s new home groundbreaking numbers in the 8:30 AM ET Housing Starts report. This report isn’t usually known to have a noticeable impact on mortgage rates since it covers such a small portion of the housing sector. The age of it now is only going to minimize its influence even more. There is a strong chance that the markets will have no reaction to the data.

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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

Medium

Unknown

Durable Goods Orders

Also at 8:30 AM ET Wednesday will be the release of December’s Durable Goods Orders report that tracks new orders for big-ticket products at U.S. factories, signaling manufacturing sector strength or weakness. These are items that are expected to last three or more years, such as airplanes, appliances and electronics. November’s release showed a 5.3% rise in new orders, indicating strength in the sector. December’s report is expected to reveal a 2.0% decline as the year came to an end. Manufacturing sector weakness is good news for bonds and mortgage rates. Accordingly, a larger than predicted decline in orders would be favorable news for mortgage pricing.

Medium

Unknown

Industrial Production

The third economic release set for Wednesday morning is January’s Industrial Production report. It gives us another snapshot of manufacturing sector strength by gauging output at U.S. factories, mines and utilities. Analysts are expecting to see a 0.3% increase in production levels from December to January. A smaller gain in output would be good news for bonds and mortgage pricing.

Medium

Unknown

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

Wednesday also has two afternoon events that we will be watching, starting with the results of the day’s 20-year Treasury Bond auction at 1:00 PM ET. A strong demand from investors may boost the broader bond market and could cause a slight improvement in rates during early afternoon trading. On the other hand, a weak interest in the securities has the potential to cause an upward revision to mortgage pricing. Last week’s two auctions gave us mixed results with the 10-year Note drawing a below-average interest and the 30-year Bond auction going very well.

Medium

Unknown

FOMC Meeting Minutes

The second afternoon event will be the 2:00 PM ET release of the minutes from last month's FOMC meeting. Traders will be looking for any indication of when the Fed may make another cut to key short-term rates. Recent data that has been posted after the meeting showed strength in the employment sector and weaker than expected inflation data. Both scenarios help boost the possibility of a rate cut coming sooner than later. Unfortunately, we will be looking at the minutes before that data was made available. If the minutes hint that a majority of Fed members may be ready to lower key rates soon (before that data was released), the recent data should fuel a positive response in the markets Wednesday afternoon. This could lead to a downward revision to mortgage pricing before the end of the day.

Medium

Unknown

Leading Economic Indicators (LEI) from the Conference Board

Thursday has December’s Leading Economic Indicators set for release at 10:00 AM ET. The Conference Board, who is a New York-based business research group, compiles the data and releases this report. It attempts to predict economic activity over the next several months, but since it is posted by a non-governmental agency, it is not considered to be of high importance to the financial and mortgage markets. Thursday's release is expected to reveal a decline of 0.1%, meaning the indicators are predicting a flat to a modest slowing in economic activity over the next several months. Weaker economic activity is usually considered good news for mortgage rates.

High

Unknown

Gross Domestic Product (GDP)

Friday also has several reports that we will be watching, including two that are considered to be highly important. The initial quarterly Gross Domestic Product (GDP) reading is set for an 8:30 AM ET release. It is the first of three versions we will get for the 4th quarter, with this one carrying the most significance. This reading is so important because, as the total sum of all goods and services produced in the US, it is considered to be the best measurement of economic activity. It is expected to show the economy grew at an annual rate of 3.0% during the final three months of the year, a slower pace than the 3rd quarter's 4.4% rate. A noticeably weaker economy would be great news for the bond and mortgage markets. That said, a larger than expected growth rate, indicating the economy was stronger than thought, will probably fuel bond selling and lead to higher rates Friday.

High

Unknown

Personal Income and Outlays

December's Personal Income and Outlays data is also scheduled for an early Friday morning release. This report gives us an indication of consumer ability to spend and current spending habits, making it relevant to the bond market and mortgage rates. Analysts are predicting an increase in income of 0.3%, signaling consumers had a little more money to spend in December than they did in November. The spending reading is expected to rise 0.4%. Stronger readings would be good news for the stock markets and could hurt bond prices, driving mortgage rates higher. Adding to the importance of this report is the fact it includes the Fed's preferred inflation indexes (PCE), which are extremely influential. Weaker than expected numbers would be considered favorable news for the bond market and mortgage rates, especially if the core PCE fails to reach monthly or annual projections.

Low

Unknown

New Home Sales

The final two reports of the week will be released at 10:00 AM ET Friday. A combination of November and December's New Home Sales report is one. This is the least important report of the week, covering the small portion of home sales that last week’s Existing Home Sales report did not include. Because several other reports are being released Friday that have a much higher importance level, this report will likely have little or no impact on mortgage rates.

Medium

Unknown

Univ of Mich Consumer Sentiment (Rev)

February's revised reading to the University of Michigan's Index of Consumer Sentiment will close out this week’s economic calendar. This index gives us an indication of consumer willingness to spend and usually has a moderate impact on the financial markets because consumer spending is such a large part of the U.S. economy. It is expected to show a small decline from the initial 57.3 reading two weeks ago. Good news for rates would be a large decline in this reading, meaning consumers are less likely to make a large purchase in the immediate future.

Overall, Friday is the most important day for mortgage rates due to the importance of the GDP reading and PCE indexes. Tuesday is a good candidate for calmest day despite coming off of a three-day weekend. It should be a very active week for the financial and mortgage markets. Therefore, it would be prudent to keep an eye on them 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... 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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