Surprise Improvement In Mortgage Rate 1-11-2018

By James Brooks

The bond market is down 1/32 (2.52%), but we still should see an improvement in Raleigh Area mortgage rates of approximately .125 of a discount point.

This is due to strength late in the day Wednesday bond market.

Yesterday?s 10-year Treasury Note auction went very well. The benchmarks we use to gauge investor interest in the securities showed a strong demand. That news helped bonds to improve during afternoon trading yesterday. It also allows us to be optimistic about today?s 30-year Bond sale. Results of it will be posted at 1:00 PM ET. Another strong sale could help improve bonds again this afternoon, possibly leading to a slight improvement in mortgage rates.

December's Producer Price Index (PPI) was posted at 8:30 AM ET, revealing a 0.1% decline in both the overall and core readings. These were well below the 0.2% that was expected for both, meaning inflationary pressures were much softer at the manufacturing level of the economy last month than many had thought. That is good news for bonds and mortgage rates.

Also released early this morning was last week?s unemployment figures. They showed that 261,000 new claims for unemployment benefits were filed last week. This was the highest number of new claims filed in almost 4 months, hinting at a softening employment sector. That is also good news for bonds and mortgage pricing, but because this is only a weekly snapshot, it hasn?t had much of an influence on the markets.

Tomorrow has two important economic reports that we need to watch. The first is December's Retail Sales data at 8:30 AM ET. This Commerce Department report measures consumer spending by tracking sales at U.S. retail level establishments. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely. Rising consumer sales fuels expectations for broader economic growth that makes long-term bonds less attractive to investors. Current forecasts are calling for a 0.4% increase in December's sales. A smaller increase would be good news for bonds and mortgage rates because it would hint at weaker than thought economic growth.

The second report of the day and final release of the week will be December's Consumer Price Index (CPI), also at 8:30 AM tomorrow. This is one of the more important monthly reports for the bond market each month since it measures inflationary pressures at the consumer level of the economy. As with today?s PPI, there are two readings in the release. The overall index is expected to rise 0.1% from November's reading while the core data rose 0.2%. Weaker than expected readings would be favorable news and should lead to bond strength and lower mortgage rates, assuming the Retail Sales report doesn?t give us negative results.

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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