Rate Lock Advisory

Tuesday, January 20th

Tuesday’s bond market has opened well in negative territory following weekend geopolitical headlines that have turned into tariff issues. Stocks are responding the same way with the Dow down 727 points and the Nasdaq down 403 points. The bond market is currently down 15/32 (4.28%), which should push this morning’s mortgage rates higher than Friday’s early pricing by approximately .250 of a discount point. The stock and bond markets were closed yesterday for the Martin Luther King Jr holiday.

15/32

Bonds

30 yr - 4.28%

728

Dow

48,632

403

NASDAQ

23,112

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High

Unknown

None

There is no relevant economic data being released today. The rest of the week has only three monthly or quarterly economic reports that may influence mortgage rates, one of which is considered to be highly important. There is also a Treasury auction that may come into play midweek, a speech by President Trump tomorrow morning and an uptick in the number of corporate earnings announcements throughout the week.

High

Negative

Tariff News

This morning’s bond losses can be attributed to tariff concerns from President Trump’s announcement of a 10% duty on all goods coming from eight European countries that have publicly disagreed with his plan to acquire Greenland and their possible response to his move. Bond reaction to tariff news has been unpredictable over the past year with fear of higher costs and rising inflation sometimes having a negative impact, but looking at the potential for them to be a drag on the U.S. economy fueling a positive reaction at other times. How the tariffs may fuel inflation is the narrative this morning.

Medium

Unknown

Geopolitical/Financial Issues

Tomorrow also lacks any economic releases that we need to be concerned about. President Trump is expected to speak tomorrow morning at the annual Davos World Economic Forum in Switzerland. He likely will speak more about political issues than financial matters that would be relevant to mortgage pricing. However, the markets will be watching his speech for insight as to what the immediate future may bring. It appears he will be speaking at 8:30 AM ET, meaning if there is a reaction, it will happen during morning hours tomorrow.

Medium

Unknown

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

This week’s first regularly scheduled event will be a 20-year Treasury Bond auction that is also taking place tomorrow. These auctions show what type of demand investors have for longer-term securities. If demand is strong, particularly from international buyers, we may see the broader bond market improve after results are posted at 1:00 PM ET. On the other hand, lackluster interest in the securities may lead to an upward revision to rates before the end of the day.

Medium

Unknown

Corporate Earnings

Also worth mentioning is that corporate earnings season gets into full swing this week. There are plenty of big-named public companies announcing their quarterly and annual earnings this week. These generally influence stock trading more than bonds. However, if the common theme is disappointing results from the bellwether companies, a strong negative reaction in stocks could fuel bond buying that pushes yields lower. This would be good news for mortgage shoppers since mortgage rates tend to track bond yields.

High

Unknown

Personal Income and Outlays

Overall, Thursday looks to be the most important day for rates due to the importance of the PCE indexes within the Personal Income and Outlays report that will be posted that day. If President Trump gives us a major surprise tomorrow, we could also see a noticeable move in rates then. The calmest day for rates may be Friday. We are now in the Fed’s mandatory pre-FOMC quiet period, meaning Fed speeches should not be a factor this week. Even though there is not a large number of scheduled events this week, there still is a high probability of seeing movement in mortgage rates multiple days. Therefore, it would be prudent to keep an eye on the markets 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... 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.

Victoria Capital Mortgage Company

455 Los Gatos Blvd. Suite 100
Los Gatos, CA 95032
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