Rate Lock Advisory

Friday, August 1st

Friday’s bond market has opened sharply higher following this morning’s employment news. Stocks were already set for a negative open due to President Trump’s tariff announcement last night but have extended those losses after today’s data. The Dow is now down 772 points while the Nasdaq has lost 543 points. The bond market is currently up 34/32 (4.23%), which should improve this morning’s mortgage rates somewhere between .375 and .625 of a discount point.

34/32

Bonds

30 yr - 4.23%

772

Dow

43,358

543

NASDAQ

20,578

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High

Positive

Employment Situation

The most influential of this morning’s three economic reports was July’s Employment report at 8:30 AM ET. It revealed the U.S. unemployment rate rose from June’s 4.1% to 4.2% last month, as it was expected to do. The big news came in the payroll numbers. They showed only 73,000 new jobs were added to the economy, falling short of the 100,000 that was expected. Furthermore, June and May’s payroll numbers were revised lower by a combined 258,000 jobs, indicating the economy had added far fewer over the past three months than analysts thought. As a clear sign of weakness in the employment sector, this data is extremely good news for bonds and mortgage rates. It also raises the chance of the Fed cutting key rates at September’s FOMC meeting after it dropped following Wednesday’s FOMC events.

Medium

Negative

Employment Situation

The third headline number in the report was average hourly earnings that rose 0.3% for the month. This matched forecasts. However, year-over-year earnings rose 3.9% when analysts predicted 3.7%. Rising earnings fuel inflation by giving consumers more money to spend and causes businesses to pass on those costs to consumers in the prices of their products and services. Not that it shows in this morning’s bond trading, but this portion of the report is bad news for bonds and mortgage pricing.

High

Positive

ISM Index (Institute for Supply Management)

Next up was the release of July’s manufacturing index from the Institute for Supply Management (ISM) at 10:00 AM ET. It also gave us favorable results with a reading of 48.0. This was a decline from June’s 49.0 and well below forecasts of 49.5. The lower reading means fewer surveyed manufacturing executives felt business conditions improved during the month than did in June. Since this is a sign of a slowing manufacturing sector, the data is good news for rates.

Medium

Neutral

Univ of Mich Consumer Sentiment (Rev)

The least influential of this morning’s reports was July's revised University of Michigan Index of Consumer Sentiment, also late this morning. They announced a reading of 61.7 that was a modest revision from the initial estimate of 61.8. This data surveys consumers about their own financial situations, giving us an indication of willingness to spend. It was not enough of a change to become relevant in this morning’s bond trading or mortgage pricing.

Medium

Unknown

Factory Orders

Next week has just a few relevant economic reports set for release and none of them are nearly as important as some of this week’s data. The week will start with the release of June’s Factory Orders report late Monday morning, but it shouldn’t have a noticeable impact on mortgage rates. In addition to the data, next week has two Treasury auctions that may affect rates during afternoon trading midweek and now that the FOMC meeting is behind us (and the Fed’s quiet period), we will get plenty of Fed-member speeches in the coming days. Look for details on all of next week’s mortgage-relevant activities in Sunday evening’s weekly preview.

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... Float 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.