Rate Lock Advisory

Wednesday, September 2nd

Wednesday’s bond market has opened in positive territory to recover a small part of yesterday’s late selling. Stocks are rallying with the Dow up 339 points and the Nasdaq up 67 points. The bond market is currently up 2/32 (4.78%), but weakness yesterday afternoon is going to cause an increase of approximately .125 of a discount point if compared to Tuesday’s early pricing. If you saw an intraday increase in rates before closing yesterday, you may see little change in this morning’s pricing.

2/32

Bonds

30 yr - 4.78%

339

Dow

53,106

67

NASDAQ

36,163

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Positive

ADP Employment

The first of this morning’s two economic releases came at 8:15 AM ET when payroll processor ADP posted their August private-sector employment data. They announced 38,000 new jobs were added by private-sector employers, falling short of the 45,000 that was expected. This was the lowest monthly number since January, maintaining concerns about the employment sector that may prevent the Fed from raising key rates soon. Since the report showed weaker than expected employment conditions, this report is good news for bonds and mortgage rates.

Medium

Neutral

Factory Orders

July's Factory Orders data was the second release of the morning. The 10:00 AM ET release revealed a 0.9% increase in new orders at U.S. factories for durable and non-durable goods. This was a larger than expected rise in orders, pointing to manufacturing strength and forcing us to label it as bad news for bonds. However, the durable goods portion of this report was released last week, so it doesn’t carry a high level of importance in the markets. Accordingly, we haven’t seen the report have an impact on this morning’s mortgage pricing.

Medium

Unknown

Fed Beige Book

The Federal Reserve will release their Beige Book report at 2:00 PM ET this afternoon. This report, which is simply named after the color of its cover, details current economic conditions in the U.S. by Federal Reserve region through the eyes of their business contacts. It is believed to be a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises or changes from the previous release, we may see movement in the markets and mortgage pricing as analysts adjust their theories about what the Fed will do regarding a potential rate hike at their September 15-16 FOMC meeting. Good news for mortgage rates would be weaker activity with signs of easing inflation that lowers the possibility of the Fed raising key short-term interest rates in the immediate future.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

Tomorrow has three more pieces of data set for release, starting with last week’s unemployment update at 8:30 AM ET. Analysts are expecting it to show 205,000 new claims for jobless benefits were filed last week, up from the previous week’s 203,00 initial filings. Rising claims are a sign of weakness in the employment sector, so the larger the number tomorrow the better the news for bonds and mortgage rates.

Medium

Unknown

Productivity and Costs (Quarterly)

Next will be revised 2nd Quarter Productivity numbers that will also be posted at 8:30 AM ET. Strong levels of productivity in the workplace allow the economy to expand without inflation concerns. It is expected to show a 1.4% increase in productivity, unchanged from the initial estimate, while the labor costs reading increase held at 1.3%. Good news for the bond market and mortgage rates would be a solid upward revision in productivity and lower labor costs, but this report doesn't usually cause a noticeable move in rates.

Medium

Unknown

ISM Service Index

The third release of the day will come from the Institute for Supply Management (ISM), who will release their non-manufacturing index (aka service index) at 10:00 AM ET. This is the sister report of yesterday's ISM manufacturing index with this version tracking business executive opinions on conditions in the service sector rather than manufacturing. It is expected to show a reading of 54.4 up slightly from July's 54.1. A reading above 50.0 means more surveyed executives felt business improved during the month than those who said it worsened. Good news for mortgage rates would be a much weaker than predicted reading.

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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