Rate Lock Advisory

Tuesday, May 17th

Tuesday’s bond market has opened well in negative territory following stronger than expected economic data. Stocks are rallying with the Dow up 364 points and the Nasdaq up 219 points. The bond market is down 24/32 (2.97%), which should cause this morning’s mortgage rates to be higher by approximately .250 of a discount point.

24/32


Bonds


30 yr - 2.97%

364


Dow


32,588

219


NASDAQ


11,882

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High


Negative


Retail Sales

April Retail Sales report was this morning’s big economic release. The Commerce Department announced a 0.9% rise in retail-level sales, matching forecasts. However, with that news also came a secondary reading that excludes more volatile and costly auto transactions. It rose 0.6% when forecasts called for a 0.3% rise. Furthermore, both readings were revised significantly higher for March. These headline numbers show that consumers spent more than previously thought in March and continued spending last month despite high inflation. It appears that bond traders were hoping to see higher prices had slowed consumer spending, indicating weaker economic activity. Since this data failed to appease traders, we are seeing a negative reaction this morning.

Medium


Negative


Industrial Production

Also posted this morning was April's Industrial Production report at 9:15 AM ET. It showed a 1.1% rise in output at U.S. factories, mines and utilities. This was stronger than the 0.5% that was predicted, hinting at manufacturing sector strength. This was also bad news for bonds, but it is the sales data that is doing most of the damage this morning.

High


Unknown


Fed Talk

Fed Chairman Powell will be speaking at a Wall Street Journal conference at 2:00 PM ET today. The hot topics that traders are looking for are thoughts on inflation and the size of the Fed’s future increases to key short-term interest rates to help control it. There is a decent chance of seeing the markets react to something he says this afternoon.

Low


Unknown


Housing Starts (New Home Construction)

Tomorrow has two events scheduled that may influence rates. April’s Housing Starts will be released at 8:30 AM ET, giving us an indication of housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show a small decline in new construction starts, hinting at weakness in the new home portion of the housing sector. This report is not considered to be of high importance to the bond market, so it likely will have little impact on mortgage rates regardless of what it reveals.

Medium


Unknown


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

We also have a 20-year Treasury Bond auction taking place with results being announced at 1:00 PM ET. As with the other auctions, a strong demand from investors could lead to lower bond yields and a slight improvement to mortgage pricing tomorrow afternoon. A lackluster interest may lead to an upward change in 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... 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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