Surprise Thursday News On Today's Mortgage Rates 4-27-2017

By James Brooks

The bond market is up 2/32 (2.29%), but because of strength late yesterday we should see an improvement in today's mortgage rates of .125 of a discount point.

Yesterday?s 5-year Treasury Note auction didn?t go overly well. The benchmarks we use to gauge investor demand showed an average level of interest at best. The bond market did not have a noticeable reaction to the auction results when they were posted. That doesn?t allow us to be too optimistic about today?s 7-year Note auction. Results will be posted at 1:00 PM ET, so look for any reaction to come during early afternoon hours. A strong demand for the securities is good news for the broader bond market and mortgage rates.

The first of today's two economic reports was March's Durable Goods Orders at 8:30 AM ET. The Commerce Department announced a 0.7% increase in new orders for big-ticket products such as appliances, electronics and airplanes. Analysts were expecting to see a 1.2% increase. While that may seem like a wide variance, it is not for this data. This report is known to show volatility, so the difference between expectations and actual results was not significant. A secondary reading that tracks orders but excludes transportation-related items such as new airplanes came in much weaker than expected. Therefore, we can consider the report good news for mortgage rates.

Also posted at 8:30 AM ET was last week?s unemployment figures. They revealed that 257,000 new claims for unemployment benefits were filed last week, up from the previous week?s revised 243,000 initial filings. That was well above the 242,000 that was forecasted. Since rising claims points towards a softening employment sector, this news was also good for the bond and mortgage markets.

Tomorrow has three pieces of economic data for the markets to digest, one of which is a major release. The big news will come at 8:30 AM ET, when the preliminary version of the 1st Quarter Gross Domestic Product (GDP) will be released. There is a strong argument to be made that this is the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measure of economic growth or contraction. I expect this report to cause sizable movement in the financial markets Friday and therefore the mortgage market also. Analysts are expecting it to show that the economy grew at an annual rate of 1.1% during the first three months of this year. That would be a much slower pace than the 2.1% pace of the final quarter of last year. A weaker rate of growth would be considered good news for mortgage rates. But a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates.

Also early tomorrow is the 1st Quarter Employment Cost Index (ECI). This index tracks employer costs for wages and benefits, giving us a measurement of wage-inflation. If it shows a large increase, we may see wage inflation concerns rise as employers will need to pass those increases into the pricing of their products and services. That would be bad news for bonds and mortgage rates. A smaller than expected increase would be good news, although I doubt this report will affect mortgage rates because the GDP is a key piece of data and will draw the most attention. Current forecasts are showing a rise of 0.6%.

The week closes with the University of Michigan's revised Index of Consumer Sentiment for April just before 10:00 AM ET tomorrow. This report gives us an indication of consumer sentiment and their willingness to spend. Current forecasts are calling for no change from the preliminary reading of 98.0. This means that surveyed consumers were no more or less optimistic about their own financial situations as they were earlier this month. This data is relevant for the same reason as Tuesday?s CCI. I don't expect this report to have a significant impact on bonds and mortgage pricing either unless it shows a noticeable revision.

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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