Friday, September 27th
Friday’s bond market has opened in positive territory despite conflicting economic headlines. Stocks are looking to close the week with gains, pushing the Dow higher by 224 points and the Nasdaq up 18 points. The bond market is currently up 11/32 (3.75%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.
11/32
Bonds
30 yr - 3.75%
224
Dow
42,399
18
NASDAQ
18,209
Trailing 90 Days - National Average
Low
Positive
Yesterday’s 7-year Treasury Note auction went fairly well with the benchmarks pointing towards a pretty strong demand from investors. Bonds improved slightly after results were announced at 1:00 PM ET, but not enough to cause widespread improvements in mortgage rates. Most lenders likely opted to wait for this morning’s data before reflecting that move.
Medium
Positive
Today’s big news was the release of August’s Personal Income and Outlays report, particularly the Personal Consumption Expenditures (PCE) indexes within the report. In short, the report gave us mostly favorable news, starting with income and spending both rising 0.2% when they were expected to increase 0.4% and 0.3% respectively. Those numbers mean consumers had less money to spend than thought and actually spent less. This is good news for bonds and mortgage rates because they point to weaker economic than expected economic activity.
High
Neutral
Drawing more attention this morning was the PCE readings that are the Fed’s preferred inflation gauges. The overall PCE rose 0.1% last month, matching forecasts. Good news came in the August core reading that rose just 0.1%, falling short of the 0.2% that was predicted. It is the annual readings that are giving us mixed results. August’s overall year-over-year rate of inflation fell 0.3% from July’s 2.5%. Since forecasts had it at 2.3% instead of the lower 2.2%, this was very good news for rates. However, the more important annual core reading rose from July’s 2.6% to 2.7%, signaling yearly core inflation was stronger last month than July.
Low
Neutral
These inflation numbers don’t vary from forecasts enough to alter the Fed’s game plan of two additional cuts to key short-term interest rates before the end of the year. We can label them favorable for the most part, but not great news. Bonds were trading in positive ground before the data was released, so we can’t attribute today’s improvement in mortgage pricing solely to this data.
Medium
Negative
September’s revised Consumer Sentiment index was posted at 10:00 AM ET. The University of Michigan announced a stronger than expected reading of 70.1. This was higher than the preliminary estimate of 69.0 from two weeks ago and the third consecutive month that it has improved. Rising confidence in personal financial situations usually translates into stronger consumer spending that fuels economic growth. Accordingly, the increase has to be considered bad news for mortgage rates.
High
Unknown
Next week brings us the regular new month batch of reports that includes highly important releases such as the ISM manufacturing index and the governmental Employment report. There are also a handful of moderately influential releases and speeches that we will be watching, but Fed Chairman Powell will start the week’s activities with a 1:00 PM ET speech Monday at a business conference in Nashville, TN. The topic is listed as Economic Outlook, meaning his words may affect the markets and mortgage rates. Look for details on all of next week’s mortgage-related events in Sunday evening’s weekly preview.
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.