Daily Rate Lock Advisory

Indexes Affecting Rate Lock

High

Negative

General Bond Trends

Ugly is an appropriate word to describe the bond and mortgage markets yesterday. The morning started with a weak open followed by continued selling throughout the day. There was no new or additional news after morning pricing was issued. It was more like a snowball that continued to grow as the day progressed. This led to the benchmark 10-year Treasury Note yield jumping to almost 5.11%, its highest level since 2007. And since mortgage rates tend to track bond yields, we saw intraday upward rate revisions throughout the afternoon. Unfortunately, barring new headlines that give a clear sign the Iran war is ending soon, there is little in the coming days that we can pin hope on as a potential catalyst to recover yesterday’s losses. In other words, don’t expect a reversal or big improvement in rates the next couple of days.

Low

Unknown

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

Yesterday’s 5-year Treasury Note auction drew a tepid demand from investors, which was not a surprise since there seemed to be much more selling of bonds yesterday than buying. We have a similar sale happening today with 7-year Notes being auctioned this time. These securities aren’t nearly as relevant to fixed mortgage rates as the longer-term sales are, but on a normal trading day an overly strong or weak sale can have a minor impact on rates. We saw no reaction to yesterday’s auction as bonds were well into their secondary sell-off before the results were announced at 1:00 PM ET. We are expecting the same lack of a reaction today also.

Medium

Negative

Weekly Unemployment Claims (every Thursday)

Last week’s unemployment figures were posted at 8:30 AM ET this morning, revealing 197,000 new claims for jobless benefits were filed. This was lower than the 204,000 that was expected and a decline from the previous week’s revised 198,000 initial filings. The fact claims moved lower week-over-week and were noticeably lower than forecasts is a sign that the employment sector is a bit stronger than thought. Accordingly, we have to label the report bad news for bonds and mortgage rates even though it isn’t having much of an impact on this morning’s rates.

Low

Neutral

New Home Sales

August's New Home Sales report was released at 10:00 AM ET. It showed sales of newly constructed homes rose 6.4% last month and that comes after July’s sales were revised much higher than previously announced. The report indicates gains in the new home portion of the housing sector, but these sales make up only a small portion of all U.S. home purchases. Technically, the report is unfavorable for rates. Realistically, though, it has had a neutral influence on mortgage pricing.

Medium

Unknown

Geopolitical/Financial Issues

We will also be following headlines from President Trump’s meeting with China’s President Xi today. Topics that are relevant to mortgage rates include trade and tariff changes along with the Middle East conflict that will directly affect inflation. There are other topics that are likely to be discussed, such as AI technology and Taiwan, but mortgage rates should be less responsive to those issues.

Medium

Unknown

Durable Goods Orders

This week’s economic calendar closes tomorrow with the release of two reports. First will be August's Durable Goods Orders at 8:30 AM ET that gives us a measure of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products that are expected to last three or more years such as airplanes, appliances and electronics. Analysts are expecting to see a 0.4% decline in new orders, pointing towards weakness in the manufacturing sector. A larger decline should help boost bond prices and cause mortgage rates to move lower because signs of economic weakness make longer-term securities more appealing to investors. It is worth noting that this data is known to be quite volatile from month-to-month, so a small variance from forecasts may not affect mortgage pricing like it would in other reports.

Medium

Unknown

Univ of Mich Consumer Sentiment (Rev)

The University of Michigan's revised Index of Consumer Sentiment for September will be released at 10:00 AM ET tomorrow. The preliminary reading that was released earlier this month showed a 51.7 reading. Analysts are expecting to see a decline, meaning consumers were more confident in their personal financial situations earlier this month than they are now. Waning confidence is good news for bonds because consumers that are worried about their own financial and employment situations are less likely to make a large purchase in the near future, limiting economic growth. Accordingly, a lower than expected reading would be favorable news for rates.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

General Bond Trends

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

Weekly Unemployment Claims (every Thursday)

New Home Sales

Geopolitical/Financial Issues

Durable Goods Orders

Univ of Mich Consumer Sentiment (Rev)

Float / Lock Recommendation