Rate Lock Advisory

Sunday, May 22th

This week brings us the release of five relevant monthly and quarterly economic reports for the markets to digest in addition to a couple of potentially relevant Treasury auctions and the FOMC minutes. None of the reports are considered to be key to the markets, although a couple are considered to be highly important. There is nothing of importance set for tomorrow, the only day without at least a single item scheduled.

---

Bonds

Market Closed

---

Dow

Market Closed

---

NASDAQ

Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Low

Unknown

New Home Sales

Activities will begin late Tuesday morning when April's New Home Sales report is released. This data gives us a small measurement of housing sector strength and mortgage credit demand by tracking sales of newly constructed homes. Most sales in the U.S. are covered under the Existing Home Sales report that was posted last week, meaning this version probably will not have much of an impact on mortgage pricing. Analysts are expecting to see a decline in sales from March's level, indicating the new home portion of the housing sector softened last month. Bond traders would prefer to see a large decline in sales.

High

Unknown

Durable Goods Orders

Wednesday has an important economic report being released in the morning and two other events during afternoon hours. The first is April's Durable Goods Orders at 8:30 AM ET that gives us an idea of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. These are items made with an expected life span of three or more years such as airplanes, appliances and electronics. It is expected to show an increase in new orders of 0.6%, hinting the manufacturing sector strengthened a little last month. This data is known to be quite volatile from month to month. Therefore, a small variance from forecasts will likely have a minimal impact on Wednesday's mortgage rates. The smaller the rise in orders, the better the news it is.

Low

Unknown

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

5-year Treasury Notes are being sold Wednesday in what is the first of this week’s two auctions that we will be watching. This sale will be followed by the 7-year Note sale Thursday. Neither of them will directly impact mortgage pricing, although they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to a slight upward revision to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors, bringing additional funds into the market. The buying that follows translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during early afternoon hours Wednesday and/or Thursday.

Medium

Unknown

FOMC Meeting Minutes

We will also get the minutes from the May 3-4 FOMC meeting Wednesday afternoon. Market participants will be looking for how Fed members feel about inflation, the global economy and the size of future rate hikes. Because of recent public speaking engagements and such, we likely are not going to see too much in the minutes that we didn't already know. They will be released at 2:00 PM ET. If there is a reaction, it will come during mid-afternoon trading Wednesday.

Medium

Unknown

GDP Rev 1 (month after initial)

The first revision to the 1st quarter Gross Domestic Product (GDP) reading will come early Thursday morning. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. Last month's preliminary reading revealed that the economy contracted at an annual rate of 1.4%. Analysts expect to see little change in this update. If the revision comes in stronger than the last estimate, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was doing better than thought. Since bonds tend to thrive in weaker economic conditions, a larger decline would be good news for mortgage rates.

Medium

Unknown

Personal Income and Outlays

Friday has two reports set for release, starting with April's Personal Income and Outlays data at 8:30 AM ET. This Commerce Department report gives us an indication of consumer ability to spend and current spending habits. A decline in income means that consumers have less money available to spend. Since consumer spending makes up over two-thirds of our economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.5% increase in income while spending is expected to have risen 0.6%. This report also has the core PCE index in it that the Fed relies heavily on as a gauge of inflation. Weaker numbers would be considered good news for bonds and mortgage rates as they would show that the economy is in worse shape than expected, especially if the PCE index moves lower.

Medium

Unknown

Univ of Mich Consumer Sentiment (Rev)

The last mortgage-related data of the week will come from the University of Michigan late Friday morning when they update their Index of Consumer Sentiment for May. This type of data is watched fairly closely because when consumers are feeling more confident about their own financial situations, they are more likely to make a large purchase in the near future. Rising confidence and the higher levels of spending that usually follow are considered negative news for bonds and mortgage rates. Friday's report is expected to show little change from this month's preliminary reading of 59.1. A higher reading would be considered bad news for bonds and mortgage pricing while a large downward revision should help boost bond prices and lead to a slight improvement in rates.

Low

Unknown

Holiday Schedule

Also worth noting Friday is the early close for the bond market ahead of next Monday's Memorial Day holiday. The bond market will close at 2:00 PM ET Friday while stocks trade for a full day. All markets will be closed the following Monday for the holiday. We sometimes see a bit of volatility in bonds in these situations as traders look to protect themselves over the three plus day weekend.

High

Unknown

None

Overall, Wednesday is a good candidate for the most important day for rates due to the potential influence of the Durable Goods Orders report and FOMC minutes. Thursday also may be active if the GDP reading is revised noticeably. With so much going on this week, 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... 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.

Portions Copyright © 2022 Pipeline ROI, LLC
Another website by Pipeline ROI