• Friday’s mortgage rates should be higher by approximately .125 - .250 of a discount point. The bond market is currently down 7/32 (4.69%).

 • Stocks are showing minor losses with the Dow down 13 points and the Nasdaq down 37 points.

 • Yesterday’s 7-year Treasury Note auction was uneventful with the 1:00 PM ET results announcement showing an average demand for the securities compared to other recent sales. This was a bit better than Wednesday’s 5-year Note sale. However, it was not enough to have an impact on bond trading or mortgage rates.

 • We did see bonds extend morning losses during afternoon trading yesterday, but it started well after the auction results were posted to indicate it wasn’t due to the auction itself.

 • The University of Michigan released their revised August Index of Consumer Sentiment at 10:00 AM ET, announcing a reading of 51.7. This was higher than the initial estimate of 51.0 two weeks ago, meaning consumers felt better about their own financial situations than previously thought. Higher levels of confidence usually translate into stronger consumer spending numbers that fuel economic growth.

 • Fed Chairman Warsh is speaking this morning at the annual Jackson Hole Fed conference in Wyoming. His comments have been taken negatively in the bond market, at least so far, even though he hasn’t said anything that should be a surprise.

 • He clearly stated that inflation is running too high and that the Fed’s primary focus is bringing prices lower.

 • Also noteworthy is that he feels the economy is not being restricted by current key short-term interest rates. In other words, there is room for those rates to be bumped higher without threat to the economy.

 • Since Chairman Warsh is obviously concerned about inflation and hints that a rate hike wouldn’t be a problem for the economy, the bond market is responding negatively. Bonds are less appealing to investors when inflation is higher because it erodes the value of their future fixed interest payment.

 • It is these Fed/inflation headlines that are driving this morning’s bond losses and increase in mortgage rates, not the consumer sentiment reading.

 • Next week has a handful of relevant economic reports scheduled for release in addition to a periodic Fed report on business conditions. The batch of data includes the typical new month reports such as the highly important ISM manufacturing index and key monthly governmental Employment report, amongst others.

 • The week starts light with nothing of importance set for Monday, leaving oil prices and Middle East headlines from the weekend to drive trading that day.

 • Look for details on all of next week’s scheduled activities in Sunday evening’s weekly preview.

 • Visit our Daily Commentary page on our site for detailed explanations on current news that is relevant to mortgage rates.

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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.