Mortgage Rates Move Up A Tick 12-12-2017

By James Brooks

The bond market is down 8/32 (2.41), which should push Raleigh Area mortgage rates higher by approximately .125 of a discount point over Monday?s rates.

Yesterday?s 10-year Treasury Note auction did not go well with several benchmarks pointing towards a weak level of investor demand. The bond market weakened after results were posted, causing some lenders to revise mortgage rates upward before the end of the day. This doesn?t allow us to be too optimistic about today?s 30-year Bond auction either. Results will be posted at 1:00 PM ET this afternoon. If it also goes poorly, we could see bonds weaken again and another round of upward rate revisions shortly after. On the other hand, if there is a strong demand in the sale, bonds and mortgage rates may improve slightly before the end of the day.

Today?s only relevant economic release was an important one. November's Producer Price Index (PPI) was posted at 8:30 AM ET, revealing a 0.4% rise in the overall reading and a 0.3% increase in the more important core data. Analysts were expecting to see the 0.4% in the overall reading, but forecasts were calling for only a 0.2% rise in the core data. The core reading is the more important of the two because it excludes more volatile food and energy costs, giving us a more stable inflation picture in the manufacturing sector of the economy. Therefore, the core reading makes the news negative for bonds and mortgage rates.

Tomorrow is expected to be a very active day for the markets and mortgage rates. It will start with the release November's Consumer Price Index (CPI) at 8:30 AM ET. This is the sister release to today's Producer Price Index, except it tracks inflationary pressures at the important consumer level of the economy. It is expected to show a 0.4% rise in the overall reading while the core data is forecasted to show a 0.2% increase. This data is one of the most watched inflation indexes, which is extremely important to long-term securities such as mortgage related bonds. Rising inflation erodes the value of a bond's future fixed interest payments, making them less appealing to investors. It also allows the Fed to be more aggressive with short-term interest rate increases. That translates into falling bond prices and rising mortgage rates. Therefore, weak readings would be favorable for the bond market and mortgage shoppers.

We also have some significant FOMC events coming tomorrow afternoon that can be highly influential on the financial and mortgage markets. The two-day FOMC meeting that began today will adjourn at 2:00 PM ET tomorrow. There is a wide consensus that expects Fed Chair Janet Yellen and friends to make a quarter point upward bump to key short-term interest rates. At the same time their post-meeting statement is made, they will also release revised economic projections. That will be followed by a press conference with Chair Yellen at 2:30 PM ET. Accordingly, expect a very active afternoon in the financial and mortgage markets tomorrow.

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.

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