Good Day For Mortgage Rates 6-14-2017

By James Brooks

The bond market is up 19/32 (2.13%), which should improve Raleigh area mortgage rates by approximately .250 of a discount point.

Yesterday?s 30-year Treasury Note auction went fairly well, meaning investor demand for the securities was a little above average. The bond market improved slightly after results were posted at 1:00 PM ET, but not enough for many lenders to improve rates. Also, Attorney General Jeff Sessions testimony before the Senate intelligence committee ended up having little impact on yesterday afternoon?s trading. The stock and bond markets did not have a noticeable reaction to his testimony either, keeping mortgage rates close to their morning levels.

Kicking off today?s very active schedule was May?s Retail Sales report at 8:30 AM ET. The Commerce Department announced that retail level sales fell 0.3% last month, falling well short of the 0.1% increase that was expected. Even a secondary reading that excludes more volatile and costly auto sales came in well below expectations. This means consumers spent much less last month than many had thought. Because waning consumer spending limits overall economic growth, this news was quite favorable for bonds and mortgage rates.

The second release of the day was also an important report. That was May's Consumer Price Index (CPI) that slipped 0.1% while the more important core reading rose only 0.1%. Both readings were slightly weaker than forecasts, indicating inflationary pressures at the consumer level of the economy were softer than predicted. That is also good news for bonds and mortgage shoppers since rising inflation makes long-term bonds less attractive to investors and also allows the Fed to make more increases to key short-term interest rates.

We also have three important Fed events to deal with this afternoon. The first is the 2:00 PM adjournment of the FOMC meeting. This is when Fed Chair Yellen and company will announce whether or not they changed key short-term interest rates. The general consensus is that they will make a .25% bump at this meeting. The recent weak economic data led some market participants to change their timeline of the Fed's rate hikes, pushing their predictions for the next increase to the following meeting. Still, the majority believe a move will be made this week. If they don?t make a move, we should see a positive reaction in bonds and mortgage rates.

At the same time, the Fed will release their updated estimates for future economic activity. They will post their predictions on GDP growth, unemployment and inflation. These could be a market mover if they show even minor revisions to any of the key headline economic numbers. The larger the change, the more likely the markets will react. Revisions that point toward slower economic growth would be good news for the bond market and mortgage rates as it would mean the Fed will probably make their next rate increase later than sooner.

They will be followed by a press conference hosted by Fed Chair Yellen at 2:30 PM ET. These press conferences with the media often lead to significant afternoon volatility in the markets and mortgage rates. Any surprises will probably cause a noticeable reaction in the markets. That means there is a high probability of seeing afternoon changes to mortgage rates this afternoon.

Look for an update to this report shortly after the financial and mortgage markets have an opportunity to act on the FOMC events. There are a couple of economic reports set for release tomorrow, but neither are considered highly important. They will be addressed in this afternoon?s update.

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.

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