Rate Lock Advisory

Sunday, August 9th

This week brings us the release of six pieces of monthly and quarterly economic reports, including a couple of highly important releases. In addition to the data, there are also two Treasury auctions set that may influence rates. There is nothing relevant to mortgage rates scheduled for release tomorrow, so look for the stock markets and political/pandemic news to drive bond trading and mortgage rates until we get to the data.

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Bonds


Market Closed

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Dow


Market Closed

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NASDAQ


Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High


Unknown


Producer Price Index (PPI)

Activities start Tuesday morning when July's Producer Price Index (PPI) is posted at 8:30 AM ET, giving us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting an increase of 0.3% in the overall index and a rise of 0.1% in the core reading. Stronger than expected readings may raise inflation concerns in the bond market. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond's future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leading to falling prices, rising yields and higher mortgage rates.

High


Unknown


Consumer Price Index (CPI)

July's Consumer Price Index (CPI) will be posted early Wednesday morning. The CPI is the sister release to Tuesday's PPI and is normally one of the more important reports we see each month because it measures inflation at the consumer level of the economy. Forecasts are showing a 0.3% rise in the overall reading and a 0.2% increase in the more important core data. Weaker readings should help lead to lower mortgage rates since it would mean inflationary pressures at the consumer level of the economy remain subdued.

Medium


Unknown


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

Wednesday's 10-year Note auction and Thursday's 30-year Bond sale have the potential to affect rates also. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds is good, the earlier losses are often recovered after the results are announced. Results of sales will be posted at 1:00 PM ET of each auction day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading those days. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher.

High


Unknown


Retail Sales (consumer spending)

While Thursday has no monthly or quarterly economic releases to be concerned with, Friday has four of them. The first of the batch will be July's Retail Sales data at 8:30 AM ET. This highly important release comes from the Commerce Department and will give us a measurement of consumer spending. Consumer level spending figures are extremely relevant to the markets because it makes up over two-thirds of the U.S. economy. Current forecasts are calling for a 1.8% increase in sales. Analysts are also calling for a 1.5% rise in sales if more volatile and costly auto transactions are excluded. Larger than expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate stronger economic growth. Ideally, we will see smaller increases that will lead to lower rates.

Low


Unknown


Productivity and Costs (Quarterly)

Employee Productivity and Costs data for the second quarter will also be released early Friday morning. It helps us track employee output per hour worked. High levels of productivity are believed to allow the economy to grow without fears of inflation. I don't see this being a big mover of mortgage rates, especially coming on a day with three other releases that include a highly important report. A sizable increase in productivity and a smaller than expected rise in labor costs would be favorable news for bonds.

Medium


Unknown


Industrial Production and Capacity Utilization

The third release of the day will be July's Industrial Production report at 9:15 AM ET that measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 3.0% increase from June's level. A decline would be considered good news for bonds and mortgage rates because it would show manufacturing sector weakness and broader economic growth would be more difficult if manufacturing activity is slipping.

Medium


Unknown


University of Michigan Consumer Sentiment (Prelim)

Finally, the University of Michigan will post their Index of Consumer Sentiment for August at 10:00 AM ET. This report will give us an indication of consumer confidence, which projects consumer willingness to spend. If a consumer's confidence in their own financial and employment situation is rising, they are more apt to make large purchases in the near future. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a decline from July’s 72.5, meaning confidence was softer this month than last and that surveyed consumers are less likely to make a large purchase. Good news for mortgage rates would be a sizable decline.

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Unknown


None

Overall, Friday is the best candidate for most active day for rates due to the number of economic releases and the importance of the Retail Sales report. That said, it is fairly safe to assume that we will see plenty of movement in rates this week. The importance of some of the data, the fact that bonds are testing a key resistance level again and what is likely to be plenty of political and aid package headlines make it high likely rates will move noticeably multiple days. Therefore, it would be prudent to watch the markets closely if still floating an interest rate and closing in the near future.

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... 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.