Rate Lock Advisory

Tuesday, December 12th

Tuesday’s bond market has opened in negative territory following stronger than expected economic data. Stocks are mixed with the Dow up 103 points and the Nasdaq down 2 points. The bond market is currently down 7/32 (2.41), which should push this morning’s mortgage rates higher by approximately .125 - .250 of a discount point over Monday’s early pricing.

7/32


Bonds


30 yr - 2.41%

103


Dow


24,489

2


NASDAQ


6,872

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium


Negative


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

Yesterday’s 10-year Treasury Note auction did not go well with several benchmarks pointing towards a weak level of investor demand. The bond market weakened after results were posted, causing some lenders to revise mortgage rates upward before the end of the day. This doesn’t allow us to be too optimistic about today’s 30-year Bond auction either. Results will be posted at 1:00 PM ET this afternoon. If it also goes poorly, we could see bonds weaken again and another round of upward rate revisions shortly after. On the other hand, if there is a strong demand in the sale, bonds and mortgage rates may improve slightly before the end of the day.

High


Negative


Producer Price Index (PPI)

Today’s only relevant economic release was an important one. November's Producer Price Index (PPI) was posted at 8:30 AM ET, revealing a 0.4% rise in the overall reading and a 0.3% increase in the more important core data. Analysts were expecting to see the 0.4% in the overall reading, but forecasts were calling for only a 0.2% rise in the core data. The core reading is the more important of the two because it excludes more volatile food and energy costs, giving us a more stable inflation picture in the manufacturing sector of the economy. Therefore, the core reading makes the news negative for bonds and mortgage rates.

High


Unknown


Consumer Price Index (CPI)

Tomorrow is expected to be a very active day for the markets and mortgage rates. It will start with the release November's Consumer Price Index (CPI) at 8:30 AM ET. This is the sister release to today's Producer Price Index, except it tracks inflationary pressures at the important consumer level of the economy. It is expected to show a 0.4% rise in the overall reading while the core data is forecasted to show a 0.2% increase. This data is one of the most watched inflation indexes, which is extremely important to long-term securities such as mortgage related bonds. Rising inflation erodes the value of a bond's future fixed interest payments, making them less appealing to investors. It also allows the Fed to be more aggressive with short-term interest rate increases. That translates into falling bond prices and rising mortgage rates. Therefore, weak readings would be favorable for the bond market and mortgage shoppers.

High


Unknown


Federal Open Market Committee (FOMC) Statement

We also have some significant FOMC events coming tomorrow afternoon that can be highly influential on the financial and mortgage markets. The two-day FOMC meeting that began today will adjourn at 2:00 PM ET tomorrow. There is a wide consensus that expects Fed Chair Janet Yellen and friends to make a quarter point upward bump to key short-term interest rates. At the same time their post-meeting statement is made, they will also release revised economic projections. That will be followed by a press conference with Chair Yellen at 2:30 PM ET. Accordingly, expect a very active afternoon in the financial and mortgage markets tomorrow.

Float / Lock Recommendation

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float 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... 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.