Rate Lock Advisory

Thursday, November 20th

Thursday’s bond market has opened in positive territory despite a sizable stock rally. Stocks are reacting mostly to earnings news late yesterday and partly to this morning’s Employment report. The Dow is up 586 points and the Nasdaq has gained 509 points. The bond market is currently up 7/32 (4.11%), but weakness late yesterday should keep this morning’s mortgage rates close to Wednesday’s early pricing. If you saw an intraday increase in rates yesterday afternoon, you should see an improvement this morning of about the same size.

7/32

Bonds

30 yr - 4.11%

586

Dow

47,725

509

NASDAQ

23,073

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Negative

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

Yesterday’s 20-year Treasury Bond auction was met with mixed interest. Some benchmarks in the results indicated a lackluster demand for the securities while others pointed to a better sale than last week’s two auctions. This was the last relevant auction of the month. In short, all three of this month’s long-term Treasury auctions raise a bit of concern about investor appetite for longer-term securities. This could be an issue for mortgage rates because they are based on similar termed securities. Waning demand from investors will make it harder for mortgage rates to move lower in the near future. Fortunately, the auction results didn’t seem to have much of an impact on the broader bond market yesterday. We did see afternoon weakness in bonds, but it appeared to be more a result of the afternoon’s second event instead of this auction.

Medium

Negative

FOMC Meeting Minutes

The minutes from last month's FOMC meeting that were posted at 2:00 PM ET yesterday raised some doubt about the Fed making a third rate cut of the year next month. They showed there was plenty of debate whether supporting a softening employment sector or preventing inflation from rising further should be more of a priority. Many members of the group felt no more rate cuts were needed this year unless something changed within the economy before their upcoming meeting. This was taken as bad news in the bond market because the lack of another rate reduction signals the Fed is more concerned about inflation than the employment sector softening. Since rising inflation makes long-term securities less appealing to investors by eroding the value of their future fixed-interest payments, we saw a negative reaction in the bond market after the minutes were released late yesterday.

High

Neutral

Employment Situation

This morning’s major economic release was September’s Employment report that was previously delayed by the government shutdown. It gave us mixed readings about the employment sector, revealing a surprise 119,000 new jobs were added to the economy when only 50,000 were expected. The good news for rates came in both of the other headline numbers. Today’s report showed the unemployment rate rose 0.1% to 4.4% in September, its highest rate since October of 2021. Furthermore, average earnings rose only 0.2% compared to the 0.3% that was expected to ease some wage inflation concerns.

Medium

Neutral

Employment Situation

Overall, we have to keep in mind that the data is aged now and most likely did nothing to alter what the Fed will do at next month’s FOMC meeting. While the payroll number is higher than expected, there were downward revisions to August and July that totaled 33,000 jobs. And the unemployment rate reportedly just missed holding the 4.3% by a fraction, causing it to be rounded up to 4.4%. In other words, you can find positive or negative results in this report, depending on what you hope to see.

Medium

Neutral

Weekly Unemployment Claims (every Thursday)

Also posted early this morning was last week’s unemployment update. It showed 220,000 new claims for jobless benefits were filed last week. This is a little lighter than the 227,000 that was expected, but in line with updates before the shutdown. That means that the government shutdown may not have had a heavy impact on the employment sector like many had thought. It doesn’t appear this report is affecting this morning’s bond trading nor mortgage pricing.

Medium

Negative

Existing Home Sales from National Assoc of Realtors

The third release of the day was October’s Existing Home Sales report from the National Association of Realtors. They announced a 1.2% rise in home resales to beat forecasts slightly. October’s increase is a sign that the housing sector is starting to improve, likely driven by lower mortgage rates. Still, it wasn’t enough of a gain for the data to influence this morning’s mortgage rates.

Medium

Unknown

Univ of Mich Consumer Sentiment (Rev)

This week’s economic calendar comes to a close late tomorrow morning with the release of November’s revised University of Michigan Index of Consumer Sentiment at 10:00 AM ET. Analysts are expecting to see a small increase from the 50.3 preliminary reading two weeks ago, meaning surveyed consumers felt better about their own financial and employment situations than previously thought. Bond traders would prefer to see a decline because waning confidence usually translates into consumers delaying a large purchase, restricting economic growth. The lower the reading, the better the news for rates.

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.