Rate Lock Advisory

Sunday, March 8th

There are seven monthly and quarterly economic reports scheduled for release this week, in addition to a couple of long-term securities Treasury auctions that may cause an afternoon revision to rates two days midweek. Tomorrow is the only day without at least one item scheduled. However, weekend headlines that oil has surpassed $100 per barrel and the Iran conflict nowhere close to coming to an end will drive trading tomorrow. At the time of this posting, stock futures are tanking and it appears bond traders are more concerned about inflation than acting as a safe haven from the stock selling (pushing yields higher). Assuming that this carries into tomorrow’s open, we should see the week start with another increase in mortgage rates.

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Bonds

Market Closed

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Dow

Market Closed

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NASDAQ

Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Unknown

Existing Home Sales from National Assoc of Realtors

February's Existing Home Sales report will begin this week’s scheduled activities at 10:00 AM ET Tuesday. The National Association of Realtors will give us this measurement of housing sector strength and mortgage credit demand. It is expected to reveal a modest decline in home resales, hinting the housing market was flat last month. Bad news would be a sizable increase in sales, meaning the housing sector is gaining momentum. That could be a little problematic for the bond market and mortgage rates because housing strength makes broader economic growth more likely.

High

Unknown

Consumer Price Index (CPI)

The highly influential Consumer Price Index (CPI) for February is next, set for release early Wednesday morning. It measures inflationary pressures at the very important consumer level of the economy. The overall CPI is expected to show a 0.3% increase, as is the more important core data that excludes more volatile food and energy prices. Good news for bonds and mortgage rates would be smaller increases in the monthly and a decline in the year-over-year readings. Stronger than anticipated readings will likely cause bond selling and fuel debate about the Fed's plans with monetary policy, leading to higher mortgage rates Wednesday.

High

Unknown

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

Also Wednesday is the 10-year Treasury Note auction that may have an impact on afternoon mortgage pricing. It will be followed by the 30-year Bond sale Thursday. Results of both sales will be posted at 1:00 PM ET on those days. If investor demand was high for the securities, we may see bonds rally during afternoon trading as it would hint that investors still have an appetite for longer-term debt. However, weak demand in the sales could lead to bond selling and an increase in mortgage rates late Wednesday and/or Thursday.

Low

Unknown

Housing Starts (New Home Construction)

Thursday has two reports that we will be watching, but neither are considered to play a major role in mortgage pricing. In addition to the weekly unemployment update at 8:30 AM ET, we will also get January's Housing Starts report that tracks new home groundbreakings. It is expected to show a decline in new starts. New home starts are an indicator of future sales and mortgage credit demand. This report usually does not draw a lot of attention, but can slightly affect rates if it reveals a sizable variance from forecasts. The lower the number of starts, the better the news for mortgage rates.

Medium

Unknown

Personal Income and Outlays

The week’s calendar will close Friday morning with four relevant economic reports, including another key inflation reading. January's Personal Income and Outlays report is set to be posted at 8:30 AM ET Friday. This data gives us an indication of consumer ability to spend and current spending habits. Current forecasts call for a rise in income of 0.4% while spending is expected to have risen 0.2%. Rising income means consumers have more money to spend. And stronger levels of consumer spending help fuel overall economic growth, making long-term securities such as mortgage-related bonds less attractive to investors.

High

Unknown

Inflation News

What makes Friday’s first report highly important is the fact it contains key inflation readings that the Fed relies on during their FOMC meetings. The Personal Consumption Expenditures (PCE) Index comes in an overall reading and a core reading. Because the Fed uses these readings, any surprises will have a heavy impact on the financial and mortgage markets. Other recent related data has not been bond-friendly nor favorable for mortgage rates. Hopefully, this version will be more helpful to mortgage shoppers. Forecasts have the overall reading up 0.3% for January and unchanged from December on a year-over-year basis. The more important core data is expected to be up 0.4% with a 3.1% annual pace being slightly stronger than December. Stronger than predicted numbers could be quite troublesome for mortgage rates.

Medium

Unknown

GDP Rev 1 (month after initial)

The first revision to the 4th Quarter Gross Domestic Product (GDP) reading is also set to be posted at 8:30 AM ET Friday. The GDP is considered to be the benchmark indicator of economic growth. This is the second version of last quarter and is expected to come in slightly stronger than the preliminary estimate of a 1.4% annual rate of growth. Because bonds are more attractive to investors during times of economic weakness, the bond market and mortgage rates would like to see a noticeable downward revision. Market traders are more interested in the current quarter’s activity than that back in October through December. Therefore, it will take a noticeable revision and the PCE indexes matching forecasts for this report to cause a change in rates.

Medium

Unknown

Durable Goods Orders

January's Durable Goods Orders report is Friday’s third early morning release, tracking orders at U.S. factories for items expected to last three or more years. Products such as electronics, refrigerators, airplanes and autos are examples of these big-ticket items. Analysts are expecting to see a 1.5% increase in new orders, signaling strength in the manufacturing sector after December showed a decline. It is worth noting that this data is known to be quite volatile from month to month, so large swings are common and won't affect rates nearly as much as it would in many other reports. Favorable news for mortgage pricing would be a large decline in orders.

Medium

Unknown

Univ of Mich Consumer Sentiment (Prelim)

The final release of the week is the preliminary University of Michigan's Index of Consumer Sentiment for March at 10:00 AM ET Friday. This index gives us a measurement of consumer willingness to spend. If consumers are more confident in their own financial and employment situations, then they are more apt to make large purchases in the near future. A big drop in confidence will be bad news for stocks and good news bonds. Forecasts have it coming in at 56.3, down a little from February’s 56.6. The lower the number, the better the news for mortgage pricing.

Overall, there are several days that could end up being the most active for mortgage rates. This weekend’s news is currently expected to cause a noticeable increase in rates tomorrow, but Wednesday and Friday’s inflation data could be market movers also. No day stands out as a good candidate for calmest with so much scheduled this week and geopolitical events in full force. It is highly likely that we will see plenty of movement in the markets and mortgage rates with the possibility of rates moving higher being much stronger than them moving lower. Accordingly, please proceed extremely 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... 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.

Fidelity Bancorp

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2990 Inland Empire Blvd. Suite 112
Ontario, CA 91764
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