Continue Improvement For Mortgage Rates 3-28-2018

By James Brooks

The bond market is up 4/32 (2.76%),along with yesterday?s afternoon gains we should see improvement to Raleigh Area mortgage rates by approximately .250 of a discount point.

Yesterday?s 5-year Treasury Note auction went very well with several benchmarks showing a strong level of investor demand. This wasn?t the reason for the bond market?s rally yesterday afternoon as bonds had improved prior to results of the auction being posted. But, once results were posted, the lender rate improvements started. They apparently waited to make sure the auction wouldn?t have a negative impact on trading before issuing intraday rate improvements. The strong sale also allows us to be optimistic about today?s 7-year Note auction. Results of it will also be posted at 1:00 PM ET, so any reaction will come during early afternoon trading.

Today?s only relevant economic data was the second revision to the 4th Quarter Gross Domestic Product (GDP) reading. The 8:30 AM ET release showed that the economy grew at an annual pace of 2.9%, exceeding expectations of 2.6% and well above the previous estimate of 2.5%. This means that the economy was stronger during the last three months of the 2017 than previously thought. By theory, that is bad news for bonds and mortgage rates. However, this data is aged now and market participants are more interested in the current quarter?s reading that will be posted next month. Also, a key inflation reading within the data did not revise higher with the overall reading increase. That prevented much of a reaction in mortgage rates.

Tomorrow has one weekly report and two monthly releases scheduled. The weekly report and least important of the batch is last week?s unemployment figures at 8:30 AM ET. They are expected to show that 230,000 new claims for unemployment benefits were filed last week, up from the previous week?s 229,000 initial claims. Since rising claims are a hint of a weakening employment sector, the higher the number the better the news it is for mortgage rates. It is worth noting though, because this is only a weekly report, it likely will have little impact on tomorrow?s mortgage rates unless it shows a significant variance.

February's Personal Income & Outlays report will also be posted at 8:30 AM ET tomorrow morning. This data helps us measure consumers' ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending related information has on the financial markets. If a consumers' income is rising, they are more likely to make additional purchases in the near future. Therefore, weaker than expected readings would be good news for bonds and mortgage rates. Analysts are currently calling for a 0.4% rise in income and a 0.2% increase in spending.

Tomorrow?s third release comes from the University of Michigan just before 10:00 AM ET. Their revised March Consumer Sentiment Index will give us another indication of consumer confidence, which hints at consumers' willingness to spend. Rising confidence is considered bad news for the bond market and mortgage pricing because it usually means consumers are more willing to spend. Tomorrow?s revision is expected to show a reading of 102.0, unchanged from the preliminary reading posted two weeks ago. Favorable results for bonds and mortgage rates would be a sizable decline in confidence.

The bond market is expected to close early tomorrow ahead of the Good Friday holiday. The stock and bond markets will be closed all day Friday and will reopen for regular trading Monday. It is common to see some pressure in bonds as investors make moves to protect themselves over the long holiday, so don't be surprised if bonds weaken slightly early tomorrow afternoon before closing.

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.

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