Rate Lock Advisory

Wednesday, December 10th

Wednesday’s bond market has opened in positive territory for the first time in five sessions. Stocks are mixed again with the Dow up 145 points and the Nasdaq down 43 points. The bond market is currently up 4/32 (4.17%), but weakness late yesterday should keep this morning’s mortgage rates close to Tuesday’s early pricing. If you saw an intraday increase yesterday afternoon, you should see a slight improvement in this morning’s rates.

4/32

Bonds

30 yr - 4.17%

145

Dow

47,705

43

NASDAQ

23,533

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Neutral

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

Yesterday’s 10-year Treasury Note auction was uneventful with the benchmarks pointing to a slightly better than average demand from investors compared to other recent sales. We did see afternoon weakness in bonds yesterday, but it came a bit after results of the auction were posted at 1:00 PM ET. There was nothing in the results that should have led to bond selling and it did not begin immediately after they were posted, so we are labeling the sale neutral for mortgage rates. There will be another similar long-term sale tomorrow when 30-year Bonds are auctioned.

Low

Positive

Employment Cost Index (Quarterly)

Today’s activities kicked-off with the release of the 3rd Quarter Employment Cost Index (ECI) at 8:30 AM ET. It revealed a 0.8% increase, meaning employer costs for wages and benefits rose during the July through September months. This was a tad softer than the 0.9% that was expected, allowing us to label the report slightly favorable for bonds and mortgage rates.

High

Unknown

Federal Open Market Committee (FOMC) Statement

The big news of the day and week is the 2:00 PM ET FOMC meeting adjournment. It is widely expected that Chairman Powell and friends will cut key short-term interest rates by a quarter point today to help support the softening employment sector. What is not known is how the vote will finish. There is little chance it will be unanimous and could be decided by just a vote or two. Generally speaking, a quarter-point cut should be a non-factor for the markets since it is so widely expected. Assuming they make a .250 cut, traders will be focused on what the Fed is likely to do going forward. This will come from the post-meeting statement, the so-called dot plot and comments during Chairman Powell’s press conference.

High

Unknown

Federal Open Market Committee (FOMC) Statement

By theory, bad news for bonds and mortgage rates would be them holding rates at current levels. Failing to lower key rates would be a clear sign that they are more concerned about inflation rising than the softening labor market. Stronger inflation makes long-term securities, such as mortgage-related bonds, less attractive to investors because it erodes the value of the bond’s future fixed interest payments. Therefore, we can expect to see bond selling and mortgage rates to move noticeably higher if this meeting yields no change to rates.

High

Unknown

General Bond Trends

That said, it is very important to remember what happened following the previous two rate cuts this year. The afternoon of the September and October FOMC meetings and the following morning both brought a sizable upward move in rates despite getting quarter-point Fed rate cuts. The reasons for the negative reaction to those cuts are debatable and there is no guarantee the bond market will react the same this time, but we should keep that in mind going into this afternoon’s events. It would be prudent to consider that pattern if still floating an interest rate and closing in the near future.

High

Unknown

Misc Fed

Along with the meeting adjournment, the Fed will also release their post-meeting statement and announce their revised economic projections (including the dot-plot that predicts where key rates will be in the future) at 2:00 PM. Those will be followed by a press conference with Chairman Powell at 2:30 PM ET. It is quite possible to see large swings in the markets this afternoon due to the amount of Fed information we will get and the uncertainty of what will be said about the future.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

Tomorrow only has the weekly unemployment update and the 30-year Treasury Bond auction results scheduled. We will address those in this afternoon’s update that will be posted shortly after the markets have an opportunity to react to the Fed events.

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.

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