Slight Increase In Today's Mortgage Rates 7-13-2017

By James Brooks

The bond market is down 10/32 (2.35%), which should lead to a slight increase in the Raleigh Triangle area mortgage rates.

Yesterday?s 10-year Treasury Note auction was uneventful. The benchmarks indicated an average level of interest in the securities. Bonds had a slight negative reaction once results were posted at 1:00 PM ET, but not enough of a move to affect mortgage rates. That leaves us unable to be too optimistic about today?s 30-year Bond auction. Its results will be released at 1:00 PM again, so any reaction will come during early afternoon trading.

Also released yesterday afternoon was the Fed Beige Book that details economic activity and conditions by Fed region throughout the U.S. It showed that the economy continued to grow at a modest or moderate pace in the majority of the Fed?s 12 districts. That can be considered slightly negative news for bonds. It also showed that inflationary pressures subsided and that while consumer spending continued to strengthen, it was at a slower pace. Many of the Fed?s districts reported weakening auto sales. Weaker inflation and signs of slowing consumer spending is good news for bonds and mortgage rates. However, we saw little reaction in the bond market with no impact on mortgage rates.

June's Producer Price Index (PPI) was posted at 8:30 AM ET this morning, revealing a 0.1% rise in the overall reading and a 0.1% increase in the more important core data. Analysts were expecting to see a slight decline in the overall reading and a 0.1% increase in the core data. What the readings indicate is that prices at the manufacturing level of the economy were a little stronger than expected, but is the more volatile food and energy costs were excluded, inflation was a bit softer than expected. Since inflation devalues bonds, we can consider the data neutral-to-slightly favorable for mortgage rates.

Last week?s unemployment figures were released early this morning also. They showed that 247,000 new claims for unemployment benefits were filed last week. This was a decline from the previous week?s revised 250,000 initial filings, hinting at a strengthening employment sector during the week. However, the size of the decline is in line with forecasts before revisions, so we are seeing no influence on today's bond trading or mortgage pricing.

We also have day two of Fed Chair Janet Yellen?s semi-annual monetary policy testimony before the Senate Bank Committee. She is speaking at 10:00 AM and her prepared statement mirrored yesterday?s, so we have seen little reaction so far. If we get any surprises, it will come in the Q&A session shortly.

Tomorrow has four pieces of economic data being posted, two of which are considered to be major releases. June's Retail Sales report will start the day at 8:30 AM ET. This data is considered to be of high importance because it measures consumer spending. Consumer spending makes up over two-thirds of the U.S. economy, so any related data is watched closely. The Commerce Department is expected to say that sales at retail level establishments rose 0.1% last month. A larger than expected increase in sales will likely cause bond selling and lead to higher mortgage rates since it would mean consumers are spending more than thought. That would point towards economic growth that makes bonds less attractive to investors.

Next up is June's Consumer Price Index (CPI), also at 8:30 AM ET. This is a mirror of today's PPI with the exception that this report measures inflation at the more important consumer level of the economy. Analysts have forecasted no change in the overall index and a 0.2% rise in the core data. Higher than expected readings could raise future inflation fears and push mortgage rates higher, while readings that fall short of forecasts should lead to lower rates tomorrow.

June's Industrial Production data is the third report of the day, coming at 9:15 AM ET. It measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength. It is expected to show a 0.4% rise in production, indicating that the manufacturing sector strengthened during the month. That would basically be bad news for bonds, however the CPI and Retail Sales will take center stage during early morning trading.

The final report of the week will be the University of Michigan's Index of Consumer Sentiment just before 10:00 AM ET. This index is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary reading for July will be posted tomorrow and is expected to show little change from June's final reading of 95.1. This would indicate that consumers were just as comfortable with their own financial and employment situations this month as they were last month. It is believed that if consumer confidence in their own finances is rising, they are more apt to make a large purchase in the near future. And with consumer spending making up such a large part of our economy, investors pay close attention to reports such as these. So, a decline in confidence would be good news for mortgage rates because it means many consumers will probably delay making a large purchase in the immediate future, limiting economic growth.

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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