Rate Lock Advisory

Tuesday, September 2nd

Tuesday’s bond market has opened in negative territory following an extended weekend of headlines and unfavorable results from the week’s first piece of economic data. Stocks are reacting negatively to recent events also, pushing the Dow lower by 312 points and the Nasdaq down 213 points. The bond market is currently down 10/32 (4.26%), which should leave this morning’s mortgage rates slightly higher than Friday’s early pricing. If you saw an intraday improvement in pricing Friday afternoon, you likely will see a more noticeable increase this morning.

10/32

Bonds

30 yr - 4.26%

312

Dow

45,232

213

NASDAQ

21,241

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High

Negative

ISM Index (Institute for Supply Management)

This morning’s major economic release was August's manufacturing index from the Institute for Supply Management (ISM) at 10:00 AM ET. They announced a reading of 48.7 that was an increase from July and higher than expectations of 48.5. The increase means surveyed manufacturing executives felt better about business conditions last month than they did in July. As a sign of strengthening economic activity, this report is bad news for bonds and mortgage pricing.

Low

Negative

Tariff News

Also worth noting are a couple of headlines from the Labor Day weekend that the markets can just now react to. A major one is that an Appeals Court ruled that most of President Trump’s tariffs are illegal. They will remain in place while the case is appealed further, but the initial reaction is negative for the bond market since the tariff income was expected to help limit the amount of Treasury debt the U.S. would need to sell to bridge the budget deficit. The opposite side of this argument is that if tariffs are removed or reduced, prices for many goods should also move lower, easing inflation. This scenario would be very good news for bonds and would also make the Fed’s decision to lower key rates much easier in the coming FOMC meetings. That said, tariffs have had a surprising impact on bonds multiple times this year. What is bad news today may be construed as positive news another day.

Medium

Negative

Inflation News

Another point influencing bonds this morning is European inflation is coming in stronger than expected, leading to their bond yields moving higher. This has had a ripple effect on the global bond markets, including our early trading this morning. Rising inflation makes long-term securities, such as mortgage-related bonds, less appealing to investors because their future fixed interest payments are worth less down the road.

Medium

Unknown

Factory Orders

Tomorrow has a morning and an afternoon event that we will be watching. July's Factory Orders data will be posted at 10:00 AM ET. This is another manufacturing sector report and is similar to last week’s Durable Goods Orders report, but includes new orders for both durable and non-durable goods. It is expected to follow suit of last week's version with a noticeable decline in new orders. Forecasts show a 1.3% drop in orders at U.S. factories, hinting at weakness in the manufacturing sector. A much larger decline would be favorable for bonds. However, this data likely won't cause much movement in rates unless its results vary greatly from forecasts since the big-ticket products portion of the report was released already.

Medium

Unknown

Fed Beige Book

The Federal Reserve will release their Beige Book report at 2:00 PM ET tomorrow. This release details current economic conditions in the U.S. by Federal Reserve region through the eyes of their business contacts. It is believed to be a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises or changes from the previous release, we may see movement in the markets and mortgage pricing as analysts adjust their theories about what the Fed will do regarding a rate cut at their September 16-17 FOMC meeting. Good news for mortgage rates would be weaker activity with signs of easing inflation that boosts the possibility of the Fed lowering key short-term interest rates at the upcoming meeting.

High

Unknown

Employment Situation

Overall, Friday is the most important day of the week due to the importance the governmental Employment report carries. No day stands out as a good candidate for a calm day for rates. There is a high probability of it being a volatile week for the markets. Therefore, please proceed cautiously if still floating an interest rate and closing in the near future.

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.

Jadestone Mortgage Inc.

NMLS#257273 | BRE#01297594
Company NMLS# 292294 | Company BRE# 01856661

3260 Blume Drive, Suite #410
Richmond, CA 94806
Member FDIC
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