Rate Lock Advisory

Friday, March 5th

Friday’s bond market has opened in negative territory following unfavorable employment data that was released this morning. Stocks are mixed with the Dow up 164 points and the Nasdaq down 76 points. The bond market is currently down 4/32 (1.57%), but the damage to rates came yesterday afternoon. A significant sell-off in bonds during afternoon trading led to sizable revisions to mortgage pricing. All said, this morning’s pricing should be approximately .500 of a discount higher than Thursday’s early pricing.

4/32


Bonds


30 yr - 1.57%

164


Dow


31,088

76


NASDAQ


12,647

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High


Negative


Fed Talk

Yesterday afternoon’s web interview with Fed Chairman Powell led to chaos in the markets instead of the reassurances that we were expecting. His comments weren’t surprising or overly negative for the bond market and mortgage rates. However, it is apparent that traders were looking for a much stronger assurance from him that inflation is not going to be a concern in the near future. He left enough room for speculation that inflation could be rising as soon as this summer. Market participants took that to mean that inflation will be rapidly rising in a couple of months.

High


Negative


Bond Trends

That was a problem because inflation is the number one nemesis of the bond market. As inflation gets stronger, the value of a bond’s future fixed interest payments become less appealing to investors. This causes the securities to be sold at a discount, pushing their yields higher to increase their appeal. Since mortgage rates tend to track bond yields, we saw big upward revisions yesterday afternoon.

High


Negative


Employment Situation

Today’s big news was the release of February’s Employment report that showed much stronger than expected results. It revealed a 6.2% unemployment rate, down from 6.3%. The most surprising number was the 379,000 new jobs added back to the economy when analysts were calling for 190,000. Furthermore, January’s payrolls were revised higher by 117,000, meaning the employment sector was much stronger than thought over the past two months. Average earnings rose 0.2%, matching expectations. Still, the payroll figures clearly make the report bad news for bonds and mortgage rates.

Medium


Unknown


None

Next week doesn’t bring us a lot of economic reports but they do include two important inflation indexes that will certainly draw plenty of attention. Also on tap are a couple of Treasury auctions that have the potential to influence bond trading and mortgage pricing. Monday has nothing of relevance scheduled. 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... Float 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.


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Carter Financial Solutions

2291 W. March Ln Suite A100
Stockton, CA 95207