Little Increase In Mortgage Rates 2-28-2018

By James Brooks

The bond market is up 1/32 (2.86%), but weakness in bonds late yesterday is likely to cause Raleigh Area mortgage rates to increase by approximately .125 of a discount point.

Today?s only relevant economic release of the day was the revised 4th Quarter Gross Domestic Product (GDP) reading at 8:30 AM ET. It showed that the economy grew at an annual pace of 2.5% during the last three months of the year. This was slightly weaker than the 2.6% that was initially estimated last month, but pegged expectations. The slower economic growth is good news for bonds and mortgage rates by theory. However, the minor change and the age of the data prevented the markets from having much of a reaction to the news.

Tomorrow has a batch of mortgage rate-relevant events taking place. January's Personal Income and Outlays data will be posted at 8:30 AM ET tomorrow. This data gives us an indication of consumer ability to spend and current spending habits. Current forecasts call for an increase in income of 0.3% while spending is expected to rise 0.2%. Lower levels of income means consumers have less money to spend. And weaker levels of consumer spending helps limit overall economic growth, making long-term securities such as mortgage-related bonds more attractive to investors. Therefore, the weaker the readings, the better the news it would be for mortgage rates.

Also at 8:30 AM ET will be the release of last week?s unemployment numbers. They are expected to show 227,000 new claims for unemployment benefits were filed last week. This would be an increase from the previous week?s 222,000 initial claims. Rising claims are a sign of a weakening employment sector, so the higher the number we see the batter the news it is for mortgage rates. Although, because this is only a weekly snapshot, it is considered to be a minor release that often has little impact on rates.

The Institute for Supply Management (ISM) will release their manufacturing index for February at 10:00 AM ET. This index measures manufacturer sentiment and can have a pretty heavy impact on the financial and mortgage markets if it varies from forecasts. It is expected to decline from January's 59.1. A reading above 50.0 means more surveyed manufacturers felt business improved during the month than those who felt it had worsened. A sub-50 reading is considered a recessionary sign. If we see a weaker than expected reading (58.4), the bond market could rally. But, a much higher than forecasted reading could lead to heavy selling in bonds, causing mortgage rates to rise. One of the reasons this data is considered so important is the fact that it is usually the first monthly report posted that covers the preceding month. It is traditionally posted the first business day of the month, allowing for a current look into conditions in the manufacturing sector.

Tomorrow also brings us day two of the Fed?s semi-annual congressional testimony. Fed Chairman Powell will be speaking to the Senate Banking Committee at 10:00 AM ET. Day two of these appearances rarely bring surprises because his prepared statement will most likely mirror what he provided in Tuesday?s appearance. If there is going to be a market reaction, it likely will come as a result of something said during the Q&A portion of the proceedings.

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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