Rate Lock Advisory - Wednesday Oct. 5th



Wednesday’s bond market has opened well in negative territory as stocks extend yesterday’s late rally. With stocks drawing investor attention, bonds are giving back more of their recent gains as funds shift away from safety and back into stocks. The Dow is currently up 75 points while the Nasdaq has gained 27 points. The bond market is currently down 21/32, pushing the yield on the benchmark 10-year Treasury Note up to 1.89%. This will likely lead to an increase in this morning’s mortgage pricing of approximately .125 - .250 of a discount point.

There is no monthly government issued economic data being posted today. We did get a couple of private sector employment-related reports. One particular was payroll processor ADP’s monthly update of their payroll numbers that showed little change from August’s level. However, it was much higher than what analysts were expecting to see, indicating stronger than thought growth in the private sector of the labor market. This could be helping to fuel some of this morning’s bond selling, but I believe most of it is simply investors unwinding positions they took during the stock sell-off as a safe-haven.

The Labor Department will give us last week’s unemployment figures early tomorrow morning. Since this report tracks only a single week's worth of new claims, its impact on the markets and mortgage rates is usually fairly minimal. Worth noting though is the fact that tomorrow's report will cover the last week of the month that Friday's monthly report will include. Therefore, a significant surprise in Thursday's numbers could cause some analysts to revise their estimates for Friday's report and may influence mortgage rates slightly.

Friday brings us the release of the almighty monthly Employment report. The Labor Department will post September's data early Friday morning. This report will reveal the U.S. unemployment rate, number of new payrolls added or lost during the month and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.

If this report gives us weaker than expected readings, bond prices should move higher and we should see lower mortgage rates Friday. However, stronger than forecasted readings could cause a sizable spike in mortgage pricing. Analysts are expecting to see the unemployment rate remain at 9.1%, an increase of 60,000 new jobs from August's level and a 0.2% increase in earnings.

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... 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.