Daily Rate Lock Advisory

Indexes Affecting Rate Lock

Low

Positive

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

Yesterday’s 30-year Treasury Bond auction appears to have gone a bit better than Tuesday’s 10-year Note sale even though the yield on the securities is the highest since August 2007. The benchmarks indicated a little stronger investor demand compared to other recent sales. We saw a slight improvement in bonds after results were announced at 1:00 PM ET, but not enough of a move to have an obvious impact on mortgage rates.

Medium

Neutral

FOMC Meeting Minutes

Also yesterday afternoon was the release of the minutes from the December 17-18th FOMC meeting that brought a quarter-point cut to key short-term interest rates. They didn’t give us too much that we didn’t already know. The overall theme is the Fed is concerned about how President-elect Trump’s tariff and immigration policies may impact their fight to bring inflation down to 2.00% annually. These topics were mentioned at least four times in the meeting, signaling to the markets that they are likely to wait and see how the policies affect the economy before making more rate reductions. This was already expected in the bond market, translating into little reaction to the news in yesterday afternoon’s trading.

Low

Neutral

Holiday Schedule

There isn’t anything of importance scheduled for today other than a handful of Fed-member speaking engagements throughout the day. While the stock markets are closed today, bonds will trade until 2:00 PM ET. This early close shouldn’t affect bond trading or mortgage rates since the markets are open tomorrow. That is more of a situation when the early closing precedes an extended holiday weekend.

High

Unknown

Employment Situation

Tomorrow has two pieces of economic data that are expected to influence mortgage rates, one being much more important than the other. The first will be the almighty monthly governmental Employment report at 8:30 AM ET. This highly important release will give us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a decline in payrolls and flat earnings would be ideal news for the bond market. Analysts are expecting to see the unemployment rate held at November’s 4.2%, while 155,000 new jobs were added to the economy and an increase in earnings of 0.3%. If we see weaker than expected results, the bond market should rally tomorrow, improving mortgage rates noticeably. However, stronger than expected readings may cause bond yields and mortgage rates to move higher.

Medium

Unknown

Univ of Mich Consumer Sentiment (Prelim)

January's preliminary reading to the University of Michigan's Index of Consumer Sentiment will finish this week's calendar at 10:00 AM. It helps predict consumer willingness to spend. By theory, if consumers feel better about their own financial and employment situations, they are more apt to make a large purchase in the near future. Stronger consumer spending numbers translate into economic growth that makes stocks more appealing and bonds less attractive to investors. Current predictions show a minor decline from December's 74.0. The lower the reading, the better the news for bonds and mortgage rates. That said, the employment data will definitely take centerstage tomorrow.

Rate Lock Advisory