Mortgage Rate News 4-13-2017

By James Brooks

The bond market is down 6/32 (2.28%), which should increase today's mortgage rates by approximately .125 of a discount point.

Yesterday?s 30-year Bond auction went similarly to Tuesday?s 10-year sale. Investor demand was not particularly strong or weak. The benchmarks pointed towards and average interest in the securities. The bond market actually weakened shortly after the results were posted, but did recover to close higher before closing.

March's Producer Price Index (PPI) was the first economic report of the week. The 8:30 AM ET release showed a 0.1% decline in the overall reading and no change in the more important core data that excludes volatile food and energy prices. Both readings were weaker than forecasts of no change and up 0.2% respectively. This means that inflationary pressures at the producer level of the economy remained flat. Because bonds are more appealing to investors when inflation is low and the readings fell short of expectations, we can consider this news favorable for bonds and mortgage rates.

Also at 8:30 AM ET was the release of last week?s unemployment figures. It revealed that 234,000 new claims for unemployment benefits were filed last week, nearly unchanged from the previous week?s revised 235,000 initial filings. Little change isn?t bad news, but since analysts were expecting to see a good-sized increase, we should consider the report negative for bonds and mortgage rates. Fortunately, this is only a weekly snapshot of the employment sector, so its impact on trading has been minimal.

The University of Michigan's Index of Consumer Sentiment was released late this morning. They announced a reading of 98.0 that exceeded forecasts of 96.3. That manes surveyed consumers were more optimistic about their own financial and employment situations than many last month. Since rising confidence usually translates into higher levels of consumer spending, this is negative news for bonds and mortgage pricing.

The bond market will close at 2:00 PM ET today, ahead of the Good Friday holiday tomorrow. The stock markets will be open for a full day of trading today. The stock and bond markets will be closed all day tomorrow 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 further before closing. This is particularly true since there is significant data being released tomorrow even though the markets are closed.

There are two reports being posted tomorrow, both of which are considered to be highly important. The Commerce Department will release March's Retail Sales data at 8:30 AM ET tomorrow morning. This piece of data gives us a measurement of consumer spending, which is very important because consumer spending makes up over two-thirds of the U.S. economy. Forecasts are calling for a 0.1% decline in sales from February to March. If we see an increase in spending, the bond market will likely fall and mortgage rates will rise as it would indicate consumers are spending more than thought, fueling economic growth. On the other hand, a larger than expected drop in sales could push bond prices higher and mortgage rates lower. However, any reaction won?t come until Monday when the markets reopen.

The final report of the week is March's Consumer Price Index (CPI), also coming at 8:30 AM ET. This index is one of the more important pieces of data the bond market gets each month. It is similar to Today's PPI but measures inflationary pressures at the consumer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors, leading to bond selling and higher mortgage rates. As with the PPI, there are two readings in the index that traders watch- the overall and the core data. Analysts are expecting to no change in the overall readings and a 0.2% increase in the core reading. The core data is the more important reading, which ideally would show a decline in prices at the consumer level, keeping inflation concerns subdued.

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... Lock if my closing was taking place over 60 days from now.

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