Rate Lock Advisory

Thursday, May 2nd

Thursday’s bond market has opened up slightly despite mostly unfavorable economic headlines. Stocks are in positive ground also with the Dow up 86 points and the Nasdaq up 62 points. The bond market is currently up 1/32 (4.63%), which with yesterday’s post-FOMC rally in bonds should improve this morning’s mortgage rates by approximately .250 - .375 of a discount point. If you saw an afternoon intraday improvement in rates late yesterday, this morning’s pricing should be nearly unchanged.

1/32

Bonds

30 yr - 4.63%

86

Dow

37,989

62

NASDAQ

15,667

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

Medium

Negative

Productivity and Costs (Quarterly)

We got three moderately important economic reports this morning. 1st Quarter Productivity and Costs data was posted at 8:30 AM ET, revealing worker output fell short of expectations during the first three months of the year. The productivity reading was up only 0.3% when it was predicted to rise 1.0%. This is one of the few economic indicators that higher numbers are good news for bonds and mortgage rates. Furthermore, the labor costs reading in the report rose much more than expected (up 4.7% vs 3.0%), making the data bad news for rates.

Medium

Negative

Weekly Unemployment Claims (every Thursday)

Last week’s unemployment figures were also released early this morning. They showed 208,000 new claims for benefits were made, matching the previous week’s revised number of initial filings. Forecasts had an increase in claims, hinting the employment sector held steady instead of weakening slightly. Since the number fell short of expectations, we are labeling it neutral to just a tad negative for rates.

Medium

Neutral

Factory Orders

The final piece of relevant economic news this morning was March's Factory Orders report at 10:00 AM ET that revealed a 1.6% rise in new orders at U.S. factories. This shows some strength in manufacturing, but did not come as a surprise to traders. Since this pegged forecasts and a good portion of the data was covered in last week’s Durable Good Orders report, we have not seen a reaction to the news.

High

Unknown

Employment Situation

Tomorrow brings us another major event- the release of April’s governmental Employment report. It is expected to show the U.S. unemployment rate held at March’s 3.8% last month while approximately 240,000 new jobs were added to the economy. Average hourly earnings, a key wage-inflation indicator, are expected to have risen 0.3%. A higher unemployment rate and a much smaller increase in the payroll and earnings numbers would be good news for bonds and rates because they would point to weaker than thought conditions in the employment sector of the economy. Stronger than expected results will probably lead to bond selling, possibly causing a sizable increase in mortgage pricing tomorrow.

Float / Lock Recommendation

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.

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