Mortgage Rates Starting To Climb Higher 1-10-2018

By James Brooks

The bond market is down 9/32 (2.58%), which should push Raleigh area mortgage rates higher by another .250 of a discount point.

There is no relevant economic data being posted this morning, but we do have a Treasury auction taking place that has the potential to affect mortgage rates. Today?s sale is for 10-year Treasury Notes followed by 30-year Bonds tomorrow. Results of today?s sale will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading. There often is some pre-auction bond selling as participants prepare for the sales. As long as the sale goes well, it is common to see those losses recovered. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to more selling. It is worth noting that this morning?s weakness goes well beyond pre-auction preparation, meaning even a strong sale likely will not erase all of this morning?s losses.

Tomorrow does have a couple of pieces of economic data for the markets to digest. The first is much important than the other. That will be December's Producer Price Index (PPI) at 8:30 AM ET. The PPI is important to the markets and mortgage rates because it measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.2% rise in the overall reading and a 0.2% increase in the more important core reading that excludes volatile food and energy prices. A larger than expected increase in the core reading could mean higher mortgage rates since strengthening inflation is bad news for the bond market. It erodes the value of a bond's future fixed interest payments, making them less appealing to investors and also allows the Fed to be more aggressive with rate hikes. As a result, they are sold at a discount to offset the drop in value, which drives their yields higher. And since mortgage rates follow bond yields, rising inflation usually translates into higher interest rates for borrowers.

Also being posted early tomorrow morning is last week?s unemployment figures. They will give us a measurement of employment sector strength but are not considered to be key numbers because it is only a weekly snapshot. Analysts are expecting to see that 248,000 new claims for unemployment benefits were filed last week. This would be a small decline from the previous week?s 250,000 initial filings. Good news would be an increase as rising claims is a sign of weakness in the sector. However, the PPI should draw much more attention than this release.

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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