Surprise News Improves Mortgage Rates 5-12-2017

By James Brooks

The bond market is up 16/32 (2.33%), which should improve today's mortgage rates by approximately .250 of a discount point.

Yesterday?s 30-year Bond auction went better than Wednesday?s 10-year Note sale. Investor demand for the securities wasn?t strong but better than Wednesday. The bond market had little reaction to the results, meaning there was no impact on mortgage rates Thursday?s afternoon.

April's Retail Sales was first of today's three economic reports. The Commerce Department announced at 8:30 AM ET that sales at retail level establishments rose 0.4% last month, falling short of the 0.6% increase that was expected. Even a secondary reading that excludes more volatile auto transactions came in softer than forecasts. That indicates consumers spent less last month than many had thought. Because consumer spending makes up such a huge portion of the U.S. economy and bonds tend to thrive in weaker economic conditions, this report should be considered good news for mortgage rates.

Also at 8:30 AM was the release of April's Consumer Price Index (CPI). It showed a 0.2% increase in the overall reading and a 0.1% rise in the more important core data. Since analysts were expecting to see a 0.2% increase in both, we can consider this report slightly favorable for bonds and mortgage rates as it points towards tame inflationary pressures at the consumer level of the economy.

The final release of the week was May's preliminary reading to the University of Michigan's Index of Consumer Sentiment late this morning. It stood at 97.7, up from April?s 97.0. This report was expected to show a small decline, meaning surveyed consumers were more optimistic about their own financial situations than predicted. As confidence rises, consumers tend to spend more, fueling economic growth. Therefore, this data is negative for bonds and mortgage pricing.

Next week is light in terms of events that are expected to affect mortgage rates. There are a couple economic reports scheduled, none of which are considered highly important. Monday has nothing set, so it is a safe bet that weekend news or stocks will drive trading and mortgage rate movement as the new week starts.

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

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