Tuesday’s bond market has opened well in negative territory even though there isn’t much to drive the markets this morning. Stocks are mixed with the Dow down 65 points and the Nasdaq up 24 points. The bond market is currently down 16/32 (4.36%), which should push this morning’s mortgage rates higher than Friday’s early pricing by approximately .375 - .500 of a discount point. If you saw an intraday increase in rates Friday afternoon, you will likely see a smaller upward move in this morning’s pricing. The bond market was closed yesterday for the Veteran’s Day holiday.
There is no relevant economic data or other events taking place today except for a few Fed-member speaking engagements. It appears that bonds are trading on election-related events again as weekend headlines regarding President-elect Trump’s cabinet choices renew concerns about future inflationary pressures that make long-term bonds less appealing to investors. This, coming over a long weekend and little else to drive trading this morning, has caused a negative open to the new week for the bond market and mortgage rates. The remainder of the week has four monthly reports scheduled for release, three of which are considered to be very important to the financial and mortgage markets. In addition to the data, we have an abundance of those Fed speeches scheduled throughout the week, including one with Fed Chairman Powell Thursday. Economic activities begin at 8:30 AM ET tomorrow when the highly important Consumer Price Index (CPI) for October is posted. The CPI measures inflationary pressures at the consumer level of the economy and is one of the most important reports the bond market sees each month. Rising inflation erodes the value of a bond's future fixed interest payments, causing them to be sold at a discount. It also forces the Fed to be more aggressive with monetary policy during their FOMC meetings. Stronger than expected CPI readings would indicate that retreating inflationary pressures have slowed and the bond market will likely react negatively to push mortgage rates higher. Analysts are expecting to see a 0.2% increase in the overall reading and a 0.3% rise in the core data. The core reading is the more important of the two because it excludes more volatile food and energy prices. Forecasts have the overall year-over-year reading rising slightly from September’s 2.4%, while the annual core reading held at September’s 3.3% last month. Overall, tomorrow is a good candidate for the most important day for mortgage rates, but Thursday and Friday could also be quite active with two more highly influential reports set for release. We should see plenty of movement in rates this week, although not nearly as volatile as last week. While there is still room for lower rates, it would be prudent to keep a very close eye on the markets if floating an interest rate and closing soon since they can get active and change direction without notice, especially if there are any surprises in this week’s key data. If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float 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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