Market Update

Updated on June 29, 2017 10:36:22 AM EDT
Thursday’s bond market has opened in negative territory yet again, pushing the benchmark 10-year Treasury Yield above the important threshold of 2.25%. Stocks are also showing losses with the Dow down 36 points and the Nasdaq down 61 points. The bond market is currently down 14/32 (2.27%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point from yesterday’s early pricing.

Yesterday’s 7-year Treasury Note auction didn’t go too well. Investor demand was average at best but we saw little reaction in the bond market and mortgage pricing. We did see bonds improve during afternoon trading yesterday, causing some lenders to revise rates slightly lower before the end of the day. However, it was due more to buyers taking advantage of recent selling and not a result of the Treasury auction.

The first of this morning’s two 8:30 AM ET economic reports was the second revision to the 1st Quarter Gross Domestic Product (GDP) reading. It showed that the economy grew at an annual rate of 1.4% during the first three months of the year. This was an upward revision of 0.2% from the previous estimate. That makes the data negative for bonds and mortgage rates by theory, but in truth it has not had much of an impact on this morning’s trading. Bonds were already showing noticeable losses during overnight trading when this data hit the wires.

The second was last week’s unemployment figures that revealed 244,000 new claims for unemployment benefits were filed last week. This was an increase from the previous week’s revised 242,000 initial filings. The higher the number of initial claims, the better the news it is for bonds and mortgage pricing. Because we were expecting to see no change in claims, the increase is favorable news. The downside is that this is only a weekly report and does not come close to carrying enough importance to offset the broader selling in bonds.

Tomorrow also has two reports set for release, but both are more important than this morning’s data was. May's Personal Income and Outlays data will be posted at 8:30 AM ET tomorrow, giving us an indication of consumer ability to spend and current spending activity. They are important because consumer spending makes up over two-thirds of the U.S. economy. If consumer income is rising, they have more money to spend each month. Analysts are expecting to see an increase of 0.3% in income and also a 0.1% rise in the spending portion of the report. Smaller increases in both of these readings would be considered good news for the bond market and mortgage rates.

The University of Michigan will close out this week's data when they update their Index of Consumer Sentiment for June late tomorrow morning. This index is another measure of consumer willingness to spend. A downward revision would be considered good news for bonds and rates because waning confidence usually translates into softer levels of consumer spending. Forecasts are calling for little change from this month's preliminary reading of 94.5.

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.

 ©Mortgage Commentary 2017
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