Rate Lock Advisory

Friday, December 2rd

Friday’s bond market has opened well in positive territory following the release of a key economic report. The stock markets are not too impressed with the data, pushing the Dow lower by 30 points and the Nasdaq down 1 point. The bond market is currently up 18/32 (2.39%), which with yesterday’s late strength should improve this morning’s mortgage rates by approximately .375 of a discount point if comparing to Thursday’s morning pricing. If your lender improved rates yesterday afternoon, you should see less of an improvement in today’s rates.

18/32


Bonds


30 yr - 2.39%

30


Dow


19,161

1


NASDAQ


5,250

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

Today’s big news was November’s Employment report at 8:30 AM ET. It showed that the U.S. unemployment rate fell to 4.6% last month and that 178,000 new jobs were added to the economy. The unemployment rate came in well below the 4.9% that was expected while the payroll number was a near match to the 180,000 that forecasts were calling for. The weaker unemployment rate is technically bad news for bonds and mortgage rates because it shows the employment sector is gaining strength. A softer payroll number would have been preferred, but at least it did not come in higher than expected. A downward revision of 19,000 jobs to October’s number tilts the payroll number to neutral-to-slightly positive for mortgage rates.

High


Positive


Employment Situation

In what is very good news for bonds is the reverse direction of average hourly earnings. Following a 0.4% jump in earnings during October that caused some concern, today’s report showed a 0.1% decline in this reading. That is quite favorable because another big increase would have certainly raised inflation concerns that would have hurt bond prices and raised mortgage rates again. We still need to watch December’s reading when it is posted early January to establish a trend, but for the time being November’s decline is being taken as good news.

Medium


Neutral


Fed Talk

Overall, today’s report didn’t affect the likelihood of the Fed raising key short-term interest rates later this month. It is widely expected that they will make a quarter-point increase to the Federal Funds and Discount rates at the next FOMC meeting (December 13-14). I believe the positive reaction we are seeing in bonds this morning is partly a result of the earnings reading and partly a sigh of relief that we didn’t get stronger numbers, especially after the ADP report earlier in the week showed a higher than expected private-sector payroll number. Either way, it is welcomed news for mortgage shoppers, at least temporarily.

High


Unknown


Bond Trends

Next week doesn’t have much scheduled to be concerned about. There are a couple of economic reports set for release, but none are considered highly important to the markets. That does not necessarily mean it will be a calm week for mortgage rates though. I still believe there is a significant threat to see bond yields and mortgage rates move even higher than they currently are. With no major data or other events set for next week, it will give bonds an opportunity to stabilize. That will help show us which direction they may be heading. As long as the benchmark 10-year Treasury Note yield remains above 2.25%, moving to and above 2.50% is a pretty strong possibility in my opinion. We are seeing some resistance around 2.41% right now. However, that is not clearly defined yet so it is not being given much weight in our rate predictions. Look for details on all of next week’s 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... Lock if my closing was taking place between 21 and 60 days... Lock 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.