Feds Meet To Increase Short-Term Rates 12-13-2017
By James Brooks
We are seeing a positive reaction in the stock and bond markets, mostly due to the sign of relief that the Fed still feels only three rate hikes are coming next year. The weaker than wanted inflation rate is also helping bond prices this afternoon. Stocks are higher than they were this morning, but some of that improvement came before the FOMC meeting adjourned. The bond market is setting new highs for the day, currently up 14/32 (2.35%), which should cause some lenders to improve pricing by approximately .125 - .250 of a discount point.
November's Consumer Price Index (CPI) was released at 8:30 AM ET this morning. It showed a 0.4% rise in the overall reading and a 0.1% increase in the more important core data. The overall reading pegged forecasts, but the core data fell short of the 0.2% increase that was expected. The weaker than thought inflation reading is good news for bonds and mortgage-related securities, leading to this morning?s early bond gains.
Tomorrow has two pieces of economic data set for release at 8:30 AM ET, one of which is much more important to the markets than the other. November's Retail Sales data is that highly important release. It will give us a key measurement of consumer spending by tracking sales at retail level establishments. This data is highly important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rapidly rising consumer spending raises the possibility of seeing solid economic growth. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in retail sales will likely drive bond prices lower and mortgage rates higher. Current forecasts are calling for an increase of 0.3% in November's sales.
The second release is last week's unemployment figures. They are forecasted to show that 239,000 new claims for unemployment benefits were filed last week, up from the previous week?s 236,000 initial claims. This report usually doesn't cause much movement in the markets or mortgage rates unless it shows a significant jump or drop in initial claims for benefits. The higher the number of claims, the better the news it is for bonds and mortgage rates since rising claims is a sign of employment sector weakness.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float 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.