Friday, January 31th
Friday’s bond market has opened fairly flat after this morning’s inflation data failed to give any surprises. Stocks are showing early gains of 38 points in the Dow and 220 points in the Nasdaq. The bond market is currently up 1/32 (4.51%), but weakness late yesterday is going to cause an increase in this morning’s mortgage rates of approximately .125 of a discount point.
1/32
Bonds
30 yr - 4.51%
38
Dow
44,920
220
NASDAQ
19,910
Trailing 90 Days - National Average
High
Neutral
This morning’s inflation readings in December’s Personal Income and Outlays report pretty much pegged expectations. The overall Personal Consumption Expenditures (PCE) index rose 0.3% last month while the more important core reading rose 0.2%. On an annual basis, the overall rose 0.2% from November’s 2.4% yearly rate and the core reading held at November’s 2.8%. All four numbers are exactly what analysts were expecting to see. These are so influential on the markets because they are the Fed’s preferred gauge of inflation. That said, today’s news doesn’t appear to alter predictions that the Fed will hold their wait and see approach before again adjusting key short-term interest rates.
Medium
Negative
Other headlines in the report were the 0.4% rise in income and a 0.7% jump in spending. The income reading was on point with predictions, but spending was stronger than thought. Analysts were expecting to see a 0.5% increase in spending. Accordingly, we are labeling the report neutral-to-slightly negative for rates.
Medium
Neutral
The 4th Quarter Employment Cost Index (ECI) also brought no surprises. It revealed a 0.9% increase in the index, signaling employer costs for employee wages and benefits rose moderately during the last three months of the year. Rising wages are troublesome for bonds because it fuels inflation throughout the economy. However, because it showed what was expected, we have not seen a reaction to the report this morning.
High
Unknown
Next week does not have a large number of economic reports and other events scheduled like this week did. However, a good portion of what is being released is likely to affect mortgage rates. Scheduled data includes the traditional highly influential new month reports, such as the ISM manufacturing index (Monday) and the governmental Employment report (Friday). Furthermore, this week’s FOMC meeting ended the Fed’s mandatory quiet period. There are plenty of Fed-member speeches scheduled next week that have the potential to affect the markets also. Look for details on all of next week’s activities in Sunday evening’s weekly preview.
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.