Rate Lock Advisory

Tuesday, July 15th

Tuesday’s bond market has opened in negative territory following the release of this morning’s key inflation data. Stocks are mixed with the Dow down 162 points and the Nasdaq up 132 points. The bond market is currently down 6/32 (4.45%), which should cause an increase of approximately .125 - .250 of a discount point in this morning’s mortgage rates.

6/32

Bonds

30 yr - 4.45%

162

Dow

44,297

132

NASDAQ

20,772

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High

Neutral

Consumer Price Index (CPI)

Today’s major economic news was the release of June’s Consumer Price Index (CPI) at 8:30 AM ET that revealed consumer level inflation rose last month 0.3% and 2.7% from the same period last year. These readings signal inflation strengthened, but matched forecasts. The good news in the report came in the more important core data that excludes more volatile food and energy costs. The core reading for June rose 0.2% when analysts were expecting to see a 0.3% rise. Furthermore, the annual core reading stood at 2.9%, falling a little short of the 3.0% that was forecasted.

High

Negative

Inflation News

In short, today’s report gave us no big surprises. While the core readings were a bit softer than expected, they show an annual inflation rate that is rising instead of falling. May’s year-over-year readings were 2.4% and 2.8% respectively. The current inflation rates are still well above the Fed’s preferred 2.0% and indicates more work is needed to bring it down to their goal. This is another reason why it is highly unlikely the Fed will cut short-term rates at their meeting later this month.

High

Unknown

Producer Price Index (PPI)

Tomorrow has two morning reports set for release and another coming during afternoon trading. First up is the sister release to today’s CPI. June's Producer Price Index (PPI) will be posted at 8:30 AM ET and is the week's second highly important inflation index. This version measures inflationary pressures at the wholesale level of the economy, instead of the consumer level. There are also two readings in this report that we will be watching. A large increase would fuel concerns about inflation rising at the wholesale level, which would likely be passed on to consumers in the immediate future. Analysts are expecting to see a 0.2% increase in both monthly readings, while they are predicted to be at a slower annual pace than May. Good news for mortgage shoppers would be weaker readings.

Medium

Unknown

Industrial Production

Also set for release tomorrow morning is June's Industrial Production data at 9:15 AM ET. It measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength. Forecasts show an increase of 0.1% from May's production, signaling the manufacturing sector was modestly stronger last month. This report is far from the most important manufacturing report we get each month, especially when the day has other events scheduled. Good news for rates would be a decline.

Medium

Unknown

Fed Beige Book

The afternoon release is the Federal Reserve's Beige Book report at 2:00 PM ET tomorrow afternoon. This report is named simply after the color of its cover but is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by Fed region throughout the U.S. via the eyes of their business contacts. If there are any significant changes in conditions since the last update, we could see an afternoon move in the markets and mortgage rates. Signs of slowing economic growth and/or softer inflation would be favorable news for rates.

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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