Rate Lock Advisory

Wednesday, July 30th

Wednesday’s bond market has opened in negative territory following stronger than expected economic news. Stocks are calm with the Dow up 3 points and the Nasdaq up 56 points. The bond market is currently down 12/32 (4.36%), but a strong rally late yesterday should allow this morning’s mortgage rates to be approximately .125 of a discount point lower than Tuesday’s early pricing. If you saw an intraday improvement yesterday afternoon, you likely will see a small increase in this morning’s pricing.

12/32

Bonds

30 yr - 4.36%

3

Dow

44,636

56

NASDAQ

21,154

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

Medium

Positive

Treasury Auctions (5,7,10,20,30 year)

Yesterday’s 7-year Treasury Note auction drew a much stronger demand than Monday’s 5-year Note sale. Bonds had already improved from morning levels before the results were posted, but the 1:00 PM ET results announcement was followed by another upward notch in bond prices. This led to a good number of lenders issuing an intraday improvement in mortgage rates sometime during afternoon trading. The auction was just a contributing factor to the revision in rates, not the sole cause of it.

Medium

Negative

ADP Employment

Kicking-off this morning’s busy calendar was the release of July’s ADP Employment report at 8:15 AM ET that revealed 104,000 new private-sector jobs were added to the economy. This was more than the 78,000 that was expected, indicating employment strength. Furthermore, June’s figure was revised higher by 10,000 jobs. As a sign of economic strength, this report is bad news for bonds and mortgage rates. It also may shift some analysts’ predictions for Friday’s governmental Employment report.

High

Negative

Gross Domestic Product (GDP)

In another bit of unfavorable news for bonds, the initial reading of the 2nd Quarter Gross Domestic Product (GDP) showed the economy grew at a 3.0% annual pace during the April through June months. This was noticeably stronger than the 2.5% that was expected and a huge rebound from the 0.5% contraction during the first three months of the year. The headline number is a clear sign the economy was stronger than thought last quarter despite tariff concerns. There is a possibility that some of the growth was front-loaded as consumers and businesses expedited purchases before tariffs started to impact retail prices early in the quarter, but for the time being we have to consider the data bad news for bonds and mortgage rates.

High

Unknown

Federal Open Market Committee (FOMC) Statement

There is more big news coming this afternoon when this week’s FOMC meeting adjourns at 2:00 PM ET. It is widely expected that Chairman Powell and friends will leave key short-term interest rates unchanged for the fifth straight meeting. Market participants are looking for when the Fed will make a rate cut. Current forecasts show two rate reductions by the end of the year with only three more meetings scheduled over that time. There will be plenty of focus on how the committee voted, which has been unanimous for all meetings dating back to last September. Recent comments by Fed Governors Bowman and Waller have many people believing the current streak will come to an end today. Both have indicated they may be ready to vote to start cutting rates as soon as this meeting. By theory, bonds should react positively to signs the Fed will make a rate cut soon because it would signal they are comfortable that inflation will be moving lower and needs less assistance from the Fed to do so.

High

Unknown

Misc Fed

The meeting adjournment and statement release will occur at 2:00 PM ET, while the press conference with Chairman Powell will start at 2:30 PM ET. We always have to assume there will be afternoon volatility in the financial and mortgage markets on these Fed days. Just how much volatility and the direction it will push mortgage rates depends on what traders take away from the statement and press conference.

High

Unknown

Personal Income and Outlays

We have more important economic data coming tomorrow morning, including the Fed’s preferred inflation gauges. We will get June’s Personal Income and Outlays report (with PCE indexes), last week’s unemployment figures and the 2nd quarter Employment Cost Index, all at 8:30 AM ET. Look for details and expectations for those reports in this afternoon’s update that will be posted shortly after the market have an opportunity to react to the FOMC events.

Float / Lock Recommendation

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... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.