Thursday Mortgage Rate News 5-11-2017

By James Brooks

The bond market is currently up 4/32 (2.41%), we should see an increase of approximately .125 of a discount point.

Yesterday?s 10-year Note auction did not go well. The benchmarks we use to gauge investor interest in the securities showed a lackluster demand. After results were posted, the bond market reacted negatively and some lenders revised pricing higher. That leaves us little to be optimistic about in today?s 30-year Bond auction. Results will be released at 1:00 PM ET, so any reaction will come during early afternoon trading. Similar results to yesterday?s sale could lead to more pressure in bonds and afternoon upward revisions to mortgage rates later today.

April's Producer Price Index (PPI) was released at 8:30 AM ET this morning. It came in much stronger than expected with the overall reading rising 0.5% and the more important core data up 0.4%. These increases were at least twice as high as the 0.2% that was expected in both. That means inflationary pressures at the manufacturing level of the economy was much stronger than many had thought, making the data bad news for bonds and mortgage rates.

Last week?s unemployment figures were also posted early this morning, revealing 236,000 new claims for unemployment benefits. This was a small decline from the previous week?s 238,000 initial filings when forecasts were calling for an increase to 242,000. The decline indicates that the employment sector was a little stronger than expected last week. Fortunately, this is a weekly report that doesn?t draw too much attention.

Tomorrow morning has three pieces of economic data for the markets to digest. April's Retail Sales is first at 8:30 AM ET. This is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up over two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.6% increase in sales from March to April. A much weaker than expected level of sales should push bond prices higher and mortgage rates lower Friday morning as it would signal that economic activity may not be as strong as thought. However, an unexpected increase could fuel concerns of economic growth that would lead to stock buying and bond selling, pushing mortgage rates higher.

Also early tomorrow morning will be the release of April's Consumer Price Index (CPI). This is the sister report to today?s PPI, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and could lead to significant volatility in the bond market and mortgage pricing if they show any significant surprises. Current forecasts are calling for a 0.2% increase in the overall index and a 0.2% rise in the core data reading. This data can also affect the Fed's timeline for raising key short-term interest rates and will also help dictate mortgage rate direction.

May's preliminary reading to the University of Michigan's Index of Consumer Sentiment will close out the week's calendar just before 10:00 AM ET tomorrow. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident in their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 96.5, which would be a decline from April's final reading of 97.0, indicating consumers are less confident than last month. If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower because waning confidence means consumers are less apt to make a large purchase in the near future. I suspect that the earlier reports will draw the most attention Friday and have the bigger impact on mortgage rates.

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

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