Daily Rate Lock Advisory

Indexes Affecting Rate Lock

Low

Neutral

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

Yesterday’s 7-year Treasury Note auction was uneventful with the benchmarks indicating it drew an average demand or slightly softer compared to other recent sales. The broader bond market showed little reaction to the 1:00 PM ET results announcement, in turn, having no impact on yesterday’s afternoon mortgage rates. This didn’t come as a surprise because the auction was for shorter-term securities than what is usually used to set fixed mortgage rates.

Medium

Negative

Employment Cost Index (Quarterly)

The 3rd Quarter Employment Cost Index (ECI) was this morning’s sole relevant piece of data and it carries just a moderate level of importance. It revealed a 0.8% rise in employer costs for wages and benefits to match forecasts. The increase in the index is a sign that employer costs are rising, contributing to broader inflation concerns. Accordingly, we are labeling the report neutral to slightly unfavorable for the bond market and mortgage rates even though doesn’t it appear to be influencing this morning’s pricing.

Medium

Unknown

Stock Influences

Bonds looked like they were going to open in positive ground due to the expected heavy selling in stocks, particularly technology stocks. Generally speaking, bad news for stocks is good news for bonds because investors tend to move funds into the safety of government Treasuries to avoid the stock sell-off. This safe-haven shift allows for bond prices to move higher, pushing yields and mortgage rates lower. They weren’t able to hold the overnight gains into this morning’s session open, but we could see them change direction again if stocks extend their current losses throughout the day. In other words, we are expecting stocks to be the reason if there is an intraday revision to mortgage rates. Larger losses in the major indexes should allow bonds to improve and mortgage rates to revise lower.

High

Unknown

ISM Index (Institute for Supply Management)

Next week has economic data scheduled for release each day, including the batch of new month reports. It starts with the ISM manufacturing index late Monday morning and ends Friday with two reports, one being the almighty monthly governmental Employment report. In between there are a handful of less influential releases that may still influence mortgage rates. We will also be following other headlines from the Middle East, oil prices, U.S. election results and movement in the stock markets as they may influence bond trading and possibly mortgage pricing.

Medium

Unknown

Misc Fed

Also worth noting is now that the FOMC meeting is behind us, so is the Fed’s mandatory quiet period. This means individual Fed members can now speak publicly about their own personal opinions on the economy, inflation and monetary policy. These speeches or public discussions take place throughout the day multiple days of the week. We could see the markets react to one or more of the speeches if they have topics related to those factors. Look for specifics on which speeches may affect the markets and details on all of next week’s other scheduled events in Sunday evening’s weekly preview.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

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

Employment Cost Index (Quarterly)

Stock Influences

ISM Index (Institute for Supply Management)

Misc Fed

Float / Lock Recommendation