Rate Lock Advisory

Wednesday, July 1st

Wednesday’s bond market has opened in negative territory following stronger than expected results from this morning’s big economic release. Stocks are showing moderate gains, pushing the Dow up 128 points and the Nasdaq up 44 points. The bond market is currently down 13/32 (0.70%) but we should see only a slight increase in this morning’s mortgage rates.



30 yr - 0.70%







Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock



Fed Talk

Yesterday’s congressional testimony by Fed Chairman Powell and Treasury Secretary Steven Mnuchin failed to yield any major surprises nor much of a reaction in the markets. For the most part, Chairman Powell warned that a second outbreak could be disastrous to the economic recovery. He also urged congress to considered further financial assistance. Mortgage rates had no reaction to the news yesterdays.



ADP Employment

June's ADP Employment report was posted at 8:15 AM ET, revealing 2.37 million new private sector jobs were recovered last month. That figure was well below forecasts of 3.5 million, but a significant upward revision to May’s payrolls may be dampening the reaction in bonds that we would expect from the June’s number. This revision took May’s payrolls from 2.7 million jobs lost to over 3 million gained. An upward revision is technically bad news for bonds and mortgage rates because it shows the employment sector may be stronger than previously thought. However, that much of a revision questions the reliability of the data, which could be why it has had little impact on today’s mortgage rates.



ISM Index (Institute for Supply Management)

The highly important Institute of Supply Management’s (ISM) June manufacturing index was released at 10:00 AM ET. They announced a reading of 52.6 that exceeded expectations of 49.0, indicating manufacturer sentiment about business conditions was much stronger than expected. Because that is a strong sign of manufacturing sector strength, we should consider the data bad news for bonds and mortgage rates. It is this report that seems to be driving this morning’s bond selling.



Federal Open Market Committee (FOMC) Minutes

We will get the minutes from last month’s FOMC meeting at 2:00 PM ET today. There is a possibility of the markets reacting to them, but I don't believe they will reveal anything surprising enough to be too concerned about this release. They will tell us how members voted for related motions and discussions about potential future actions by the Fed. If there is a reaction, it likely will be minor.



Employment Situation

Tomorrow has three releases scheduled that are on our watchlist. The most important of the batch is the single most important report we see each month. That is the monthly Employment report at 8:30 AM ET. It will give us June's unemployment rate and number of new payrolls added or lost. These are considered to be extremely 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, a large decline in payrolls and no change in earnings. Weaker than expected readings would likely help boost bond prices and lower mortgage rates tomorrow. However, stronger than expected readings could be extremely detrimental to mortgage pricing. Analysts are expecting to see the unemployment rate at 12.2% and 3.25 million jobs added to the economy. A higher unemployment rate and fewer new jobs would be considered favorable news for rates. It will also be interesting to see if there are revisions to April’s numbers that came in surprisingly stronger than predicted.



Weekly Unemployment Claims (every Thursday)

Also at 8:30 AM tomorrow will be the release of last week’s unemployment figures. They are expected to show that 1.4 million new claims for unemployment benefits were made last week. A high number of claims is considered to indicate a weak employment sector. Therefore, good news for rates would be a higher number of new filings than forecasts.



Factory Orders

The Commerce Department will post May's Factory Orders data late tomorrow morning, which is similar to the Durable Goods Orders report that was released last week. The biggest difference is that this week's report covers both durable and non-durable goods. It usually doesn't have as much of an impact on the bond market as the durable goods report. Since it follows a major economic release that will draw much more attention, there is no reason to believe this report will come into play. Current expectations are showing an 8.0% rebound in new orders from April's levels as states started to reopen.



Holiday Schedule

The bond market will close early tomorrow afternoon ahead of Friday's Independence Day holiday closure and will reopen for regular trading Monday morning. The pre-holiday early close sometimes creates pressure in the bond market as traders look to protect themselves while U.S. markets are closed for the extended weekend.

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.