Daily Rate Lock Advisory

Indexes Affecting Rate Lock

Medium

Unknown

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

Yesterday’s 5-year Treasury Note auction was uneventful. The benchmarks we use to gauge investor demand showed an average level of interest compared to other recent sales. Without it being a particularly strong or weak sale, bond had little reaction to the 1:00 PM ET results announcement. In other words, it had no impact on mortgage pricing. It also leaves us to be cautiously optimistic about today’s 7-year Treasury Note auction. If the 1:00 PM ET results post indicates demand was stronger for these securities, we may see afternoon gains in bonds that could lead to a slight downward revision to mortgage rates during mid-afternoon trading.

Medium

Negative

Weekly Unemployment Claims (every Thursday)

The first of this morning’s four economic releases was last week’s unemployment update at 8:30 AM ET. It revealed only 218,000 new claims for jobless benefits were made, falling well short of the 235,000 that was predicted and down from the previous week’s revised 232,000 initial filings. Declining claims for unemployment benefits are a sign of strength in the employment sector. Therefore, this data is negative for bonds and mortgage rates, especially since forecasts had the number rising from the previous week.

High

Negative

Durable Goods Orders

August's Durable Goods Orders report was also posted early this morning, pointing to strength in the manufacturing sector. New orders for big-ticket items such as airplanes, appliances and electronics rose 2.9% last month. Analysts were expecting see a decline in the neighborhood of 0.5%. A secondary reading that excludes orders for transportation-related products that are more costly (airplanes) came in higher than expected also. While the large increase is bad news for mortgage rates, this data is known to be quite volatile from month to month, so the variance from expectations is not nearly as relevant as it would have been in many other reports.

Low

Negative

GDP Rev 2 (month after Rev 1)

Today’s third early morning report also showed some surprising results that are considered to be unfavorable for bonds and mortgage rates. The second revision to the 2nd Quarter Gross Domestic Product (GDP) reading revealed the economy was much stronger than previously thought. The GDP reading was revised from up 3.3% to up 3.8%. If this size of a variance came in the initial reading, or possibly even the first revision, we could expect to see a strong reaction in the bond market. However, while the stronger GDP is bad news for the bond and mortgage markets, it has had only a minimal impact on this morning’s trading because traders are more interested in data of the current quarter than 3 – 5 months ago.

Medium

Neutral

Existing Home Sales from National Assoc of Realtors

The National Association of Realtors announced at 10:00 AM ET that home resales slipped 0.2% last month. This was a tad better than expected, but not enough of a difference to influence this morning’s rates. Generally speaking, housing sector weakness is good news for the bond market and mortgage pricing. August’s sales data leaves us to consider the report neutral for mortgage rates.

Medium

Unknown

Fed Talk

Also worth noting is the large number of Fed speeches scheduled today. It appears there are at least six of them set throughout the day. None of them look to be key or highly likely to draw a reaction in the markets, but any surprise comments from a Fed member can end up influencing bond trading and mortgage pricing. We seem to be getting conflicting opinions so far in the post-FOMC speeches regarding what the Fed needs to do next. It is apparent that there is no longer a strong majority or unified thought process in the Fed.

High

Unknown

Inflation News

Tomorrow has two more economic reports, one of which has the potential to be highly influential to the markets. The one that will draw much more attention is August's Personal Income and Outlays at 8:30 AM ET that gives us an indication of consumer ability to spend and current spending habits, along with the Fed’s preferred inflation gauges. It is those inflation readings that make this report so important. Analysts are expecting to see a 0.3% rise in the overall Personal Consumption Expenditures (PCE) reading and a 0.2% increase in the more closely watched core PCE that strips out volatile food and energy costs. On an annual basis, the overall PCE is predicted to have risen slightly from July’s 2.6% pace while the core readings held at July’s 2.9% year-over-year rate. Unexpected increases would be bad news and could prevent the Fed from lowering key short-term rates again at their October FOMC meeting. However, softer than expected inflation numbers would be considered good news for bonds and mortgage rates.

Medium

Unknown

Personal Income and Outlays

The other headline readings in this report are expected to show a 0.3% rise in income and a 0.5% rise in spending. Favorable news would be a smaller income increase, meaning consumers had less money to spend, and weaker spending since that category makes up over two-thirds of the U.S. economy. Bonds tend to thrive in weaker economic conditions, leading to lower mortgage rates.

Medium

Unknown

Univ of Mich Consumer Sentiment (Rev)

Closing out this week's calendar will be the University of Michigan's revised Index of Consumer Sentiment for September at 10:00 AM ET tomorrow. The preliminary reading that was released earlier this month showed a 55.4 reading. Analysts are expecting to see no change from the earlier estimate. Waning confidence is good news for bonds because consumers that are concerned about their own financial and employment situations are less likely to make a large purchase in the near future, limiting economic growth. Accordingly, a lower than expected reading would be favorable news for rates.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

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

Weekly Unemployment Claims (every Thursday)

Durable Goods Orders

GDP Rev 2 (month after Rev 1)

Existing Home Sales from National Assoc of Realtors

Fed Talk

Inflation News

Personal Income and Outlays

Univ of Mich Consumer Sentiment (Rev)

Float / Lock Recommendation