Rate Lock Advisory

Sunday, January 18th

This holiday-shortened week has only three relevant monthly or quarterly economic reports for the markets to digest, one of which is considered highly important. There is also a Treasury auction that may come into play midweek and a speech by President Trump. The stock and bond markets will be closed tomorrow for the Martin Luther King Jr holiday and will reopen for regular trading Tuesday. There will be no update to this report tomorrow.

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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

Medium

Unknown

Geopolitical/Financial Issues

There is no relevant economic data set for release Tuesday or Wednesday. President Trump is expected to speak Wednesday 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. His recent threat to add tariffs to any countries that don’t support his plans to acquire Greenland does fall under the relevant category, but how the markets will react is unknown. Market reaction to tariff headlines and actions has become unpredictable, so we don’t know what to expect Wednesday. It appears he will be speaking at 8:30 AM ET, meaning if there is a reaction, it will happen during morning hours.

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 Wednesday. 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.

Low

Unknown

GDP Rev 1 (month after initial)

Thursday has two monthly reports scheduled for release in addition to the weekly unemployment update. First will be the weekly unemployment numbers and the revised 3rd Quarter Gross Domestic Product (GDP) reading at 8:30 AM ET. The GDP measures the total of all goods and services produced in the U.S., making it the benchmark measurement of economic growth. Last month's delayed preliminary estimate of a 4.3% annual rate of growth surprised many since forecasts had that estimate at 3.2%. Most analysts are expecting the revised reading to match the 4.3% that was announced last month. Technically, a downward revision would signal slower than thought economic growth, which would be favorable for bonds. However, since this data is old now (July through September) and comes on the same morning as a major report, it likely will have no impact on mortgage rates regardless of what it shows.

High

Unknown

Personal Income and Outlays

The most important of Thursday’s three releases is the Personal Income and Outlays report that will give us an indication of consumer ability to spend and their current spending habits. This is a combination of October and November’s data since both were delayed by the government shutdown. While the income and spending readings are moderately influential, it is the Personal Consumption Expenditures (PCE) indexes in the data that elevate the importance of the report. These are the Fed’s preferred inflation readings, so they are relied upon heavily during the Fed’s monetary policy decisions. The bond market tends to thrive in weaker economic conditions, so good news for mortgage rates would be softer than expected readings, particularly in the PCE readings. Current forecasts show a 0.4% increase in income and a 0.5% rise in spending. Analysts are also expecting the overall and core PCE readings to both have increased 0.2% and annual readings to have risen slightly.

Medium

Unknown

Univ of Mich Consumer Sentiment (Rev)

January's preliminary reading to the University of Michigan's Index of Consumer Sentiment will finish this week's calendar late Friday morning. It helps predict consumer willingness to spend. By theory, if consumers feel better about their own financial and employment situations, they are more apt to make a large purchase in the near future. Stronger consumer spending numbers translate into economic growth that makes stocks more appealing and bonds less attractive to investors. Predictions show little change from December's 54.0. The lower the reading, the better the news for bonds and mortgage rates.

Low

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.

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Unknown

none

Overall, Thursday looks to be the most important day for rates due to the importance the PCE indexes carry. If President Trump gives us a major surprise Wednesday, we could also see a noticeable move in rates that day. The calmest day may be Friday since Tuesday could be a bit volatile following the three-day weekend. 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.