Rate Lock Advisory

Wednesday, November 6th

Wednesday’s bond market has opened down sharply as the markets react to last night’s election news. Stocks are up huge on the same news, pushing the Dow higher by 1,296 points and the Nasdaq up 400 points. The bond market is currently down 40/32 (4.45%), which will reverse yesterday’s big intraday improvement in rates. This morning’s mortgage rates should be approximately .125 - .250 of a discount point higher than Tuesday’s early pricing.

40/32


Bonds


30 yr - 4.45%

1,296


Dow


18,841

400


NASDAQ


18,839

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium


Positive


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

Yesterday’s 10-year Treasury Note auction went pretty well with the benchmarks pointing towards a solid demand from investors. Bonds had weakened during late morning trading, causing a few lenders to issue an upward revision to rates. Then they started to make up ground before the auction results were announced at 1:00 PM ET. Once the favorable results were posted, we saw the bond rally pick up momentum that continued throughout the rest of the day. This led to widespread improvements to mortgage rates before closing that were lost in this morning’s sell-off.

High


Negative


Election News

We don’t have any relevant economic data being released today. This morning’s markets are trading almost exclusively on last night’s election results. The primary theory behind the stock rally is that President Trump’s policies, with Republican control of both chambers of Congress to support him, will create a better environment for equities through lower corporate tax rates and stronger economic growth. Bonds are tanking because those same policies are expected to significantly add to the U.S. budget deficit, which requires much more debt to be issued to keep the government running. This large amount of new supply likely will not be covered by ample demand to prevent yields from going higher, making current bonds less appealing to investors. Hence, bond selling and higher mortgage rates today.

Medium


Unknown


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

We also have today’s 30-year Treasury Bond auction to watch. If the 1:00 PM results announcement shows similar results to yesterday’s sale, we could see another favorable afternoon move in bonds and mortgage pricing. However, there is practically no chance the auction results will erase this morning’s losses.

Medium


Unknown


Productivity and Costs (Quarterly)

Tomorrow morning has two pieces of economic data scheduled for release at 8:30 AM ET. In addition to the weekly unemployment update, we will also get 3rd Quarter Productivity data. It is expected to show a 2.4% rise in worker productivity during the quarter. A noticeably larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without pushing inflation higher. A secondary reading that tracks labor costs is expected to show a 0.8% rise in costs. It will take a significant variance from forecasts for this report to noticeably affect mortgage rates.

Medium


Unknown


Weekly Unemployment Claims (every Thursday)

Last week’s unemployment update is expected to show 221,000 new claims for jobless benefits were filed last week. This would be an increase from the previous week’s 216,000 that would signal weakness in the employment sector. Good news for mortgage rates would be a much higher number of initial filings.

High


Unknown


Federal Open Market Committee (FOMC) Statement

The big news coming tomorrow will be during afternoon hours when this week's FOMC meeting adjourns at 2:00 PM ET. Fed Chairman Powell and friends are expected to make their second consecutive rate cut, lowering key short-term rates by .250 of a percent rather than the .500 that we saw in September. Recent economic data has nearly removed the possibility of them duplicating the September cut. In fact, a few analysts feel the Fed may not make a move at this meeting. That said, a strong majority are expecting to see a quarter point reduction this week and another at next month’s meeting.

High


Unknown


Misc Fed

The meeting was held today and tomorrow instead of the traditional Tuesday and Wednesday due to the election. It will adjourn and their written statement will be released at 2:00 PM ET. The press conference with Chairman Powell will start at 2:30 PM ET. We should see a good amount of volatility in the markets tomorrow afternoon. Assuming we do get a quarter point rate cut, traders will be most interested in what the Fed expects to do at December’s meeting.

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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