Rate Lock Advisory

Tuesday, December 10th

Tuesday’s bond market has opened in negative territory even though this morning’s only economic data gave us favorable results. Stocks are showing losses also with the Dow down 59 points and the Nasdaq down 4 points. The bond market is currently down 7/32 (1.84%), which should push this morning’s mortgage rates higher by approximately .250 of a discount point compared to yesterday’s early pricing. Weakness late in the day yesterday is also contributing to this morning’s increase in rates.



30 yr - 1.84%







Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock



Productivity and Costs (Quarterly)

3rd Quarter Productivity numbers were posted early this morning. They showed that worker output declined at a 0.2% annual rate during the July through September months. This was close to expectations and a small revision from the preliminary estimate. What came a surprise was a sizable downward revision to the Labor Costs component in the data. This morning’s release revealed an annual rate of up 2.5% in this reading compared to the preliminary estimate of up 3.6%. That revision means that labor costs did not rise as much as previously thought, making the update good news for bonds and mortgage rates. Unfortunately, this is not considered to be a highly important release, meaning we have not seen a strong reaction to the data.



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

Later today we will get the results of the 10-year Treasury auction that is taking place this morning. Results will be posted at 1:00 PM ET, meaning if we get a reaction it will come during early afternoon trading. If it was met with a strong demand from investors, particularly international buyers, we should see strength in the broader bond market and possibly an improvement to mortgage pricing during afternoon hours. On the other hand, a weak interest could lead to an upward revision in rates this afternoon. The 10-year Note and 30-year Bond auctions generally are back to back but due to tomorrow’s FOMC events, the 30-year sale will be held Thursday.



Consumer Price Index (CPI)

Tomorrow begins the more important events of the week with the release of November's Consumer Price Index (CPI) at 8:30 AM ET. It tracks inflationary pressures at the consumer level of the economy. Tomorrow’s release is expected to show a 0.2% rise in both the overall and core data readings. The core reading is the more important of the two as it excludes more volatile food and energy costs, leaving us more stable information. This data is one of the most watched inflation indexes, which is extremely important to long-term securities such as mortgage related bonds. Rising inflation erodes the value of a bond's future fixed interest payments, making them less appealing to investors. It also allows the Fed to be more aggressive with short-term interest rate increases. That translates into falling bond prices and rising mortgage rates. Therefore, weak readings would be favorable for the bond market and mortgage shoppers.



Federal Open Market Committee (FOMC) Statement

Also tomorrow is an afternoon of Fed events that can be highly influential on the financial and mortgage markets. The two-day FOMC meeting will adjourn at 2:00 PM ET tomorrow. There is a wide consensus that Fed Chairman Powell and friends will leave key short-term interest rates unchanged at this meeting. At the same time their post-meeting statement is made, they will also release revised economic projections. They will be followed by a press conference with Chairman Powell at 2:30 PM ET. This meeting may not bring as much anxiety as the past several meetings because there is little chance that they will make a change to rates. Look for the revised economic projections and/or a possible change to their balance sheet to be the cause of a noticeable move in the markets. There is the potential for it to be very active afternoon for mortgage rates, but it is more likely we will see a relatively calm reaction this time.

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.

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