June 28th, 2024 4:22 PM by T. Fanning
I hope you have a great weekend and a great 4th!
This morning's bond market optimism faded as sellers took over in the afternoon. Bonds ended the week at their weakest, with next week's trading poised to be driven by major economic data releases. Despite bonds ending the week down, interest rates were actually up from last Friday’s numbers.
Next week, despite the holiday, key events like June's ISM index, the Employment report, FOMC minutes, and Fed speeches may impact mortgage rates. Expect significant market movement.
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Last Updated: 6/28/24
Friday's bond market has opened in positive territory as the markets exhale following this morning's inflation news. Stocks are showing early gains with the Dow up 181 points and the Nasdaq up 141 points. The bond market is currently up 2/32 (4.27%), which should improve this morning's mortgage rates by approximately .125 of a discount point.
Today's big news was the release of May's Personal Consumption Expenditures (PCE) index that showed inflation was flat last month and eased a little on an annual basis. The monthly overall PCE was unchanged from April and the core reading rose 0.1%. Annually, both slipped to 2.6%, down from April's pace and slightly closer to the Fed's preferred 2.0% annual rate, dropping it to the slowest pace since March 2021. All of these numbers matched expectations. This is why we are seeing a slightly positive reaction to the news instead of a strong bond rally or sell-off this morning.
The other headline numbers from this report were an increase of 0.5% in income but only a 0.2% rise in spending. Income was expected to increase 0.4% while spending was predicted to move higher 0.3%. These are mixed readings with the rise in income being bad news and the softer spending considered good news. Neither of these varied from forecasts enough to take attention away from the PCE readings, leaving us with a limited but favorable reaction in bonds.
The University of Michigan announced their revised June Index of Consumer Sentiment at 10:00 AM ET this morning. They said the index stood at 68.2 this month, greatly exceeding expectations of 65.7. This is bad news for bonds and mortgage rates because more confident consumers are likely to make larger purchases. Consumer spending makes up over two-thirds of the U.S. economy, so stronger consumer spending fuels economic growth that makes bonds less appealing to investors. Accordingly, this report is bad news for mortgage rates and may be preventing a more visible improvement in mortgage pricing.
Next week will be shortened by the Independence Day holiday yet still brings us a couple of major events that have the potential to cause a sizable move in mortgage rates. The calendar begins late Monday morning with the release of June's ISM manufacturing index and ends with the almighty monthly Employment report Friday morning. The week also has a few moderately important reports, the minutes from this month's FOMC meeting and a handful of Fed speeches to drive trading. Despite losing a full day Thursday and a few hours late Wednesday for the holiday, there is a high probability of seeing a great deal of movement in the financial markets and mortgage rates next week. Look for details on what to expect next week in Sunday evening's weekly preview.
If I were considering financing/refinancing a home, I would....
Lock if my closing were taking place within 7 days... Lock if my closing were taking place between 8 and 20 days... Float if my closing were taking place between 21 and 60 days... Float if my closing were taking place over 60 days from now...
This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.*
*https://www.homeloanmortgageco.com/DailyRateLockAdvisory
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