Indexes Affecting Rate Lock

Medium

Neutral

Treasury Auctions (5,7,10,20,30 year)

Yesterday’s 20-year Treasury Bond auction was relatively uneventful. The benchmarks we use to gauge investor demand showed an average interest in the securities compared to other recent sales. Accordingly, bonds showed little reaction after results were announced at 1:00 PM ET, preventing any impact on mortgage rates. This sale was not helpful in telling us if investor demand for long-term debt is waning or improving.

High

Positive

Consumer Price Index (CPI)

This morning’s big news was the release of November’s Consumer Price Index (CPI) at 8:30 AM ET. It revealed inflation at the consumer level of the economy was weaker than expected. Both the monthly and annual readings indicated inflationary pressures were softer than thought, at least at the consumer level. The overall reading rose 0.2% last month, as did the more important core data that excludes more volatile food and energy costs. Forecasts had them rising at a 0.3% pace.

High

Positive

Consumer Price Index (CPI)

Even better news came in the annual data. The overall reading dropped to 2.7% while the year-over-year core reading came in up 2.6%. Both readings were at 3.0% in the last update and were expected to remain close to those levels. Slowing inflation is very good news for bonds and mortgage rates. Besides allowing the Fed to be more aggressive with rate cuts to support the employment sector, weaker inflation also makes bonds more appealing to investors since their future fixed interest payments are worth less in future dollars when prices are rising.

Medium

Neutral

General Bond Trends

Make no mistake, this morning’s inflation data headlines are favorable for bonds and mortgage rates. However, the post-release move in bonds has been fairly minimal. The bond market was already set for a decent open long before the CPI was released. This could mean that traders are questioning the authenticity of the data after the shutdown disruption, or it could be traders were not surprised by the data and would have had a strong negative reaction if it came in stronger than predicted. Either way, we should be watching what the benchmark 10-year Treasury Note yield does throughout the day. We may see the morning rally lose a little steam before the end of the day.

Medium

Neutral

Weekly Unemployment Claims (every Thursday)

Last week’s unemployment update was also released early this morning. It showed 224,000 new claims for jobless benefits were made, down from the previous week’s revised 237,000 initial filings. A decline in claims is a sign the employment sector strengthened last week. That said, analysts were expecting to see a noticeable retreat after the previous week’s surprise spike and the actual number was very close to the 225,000 that was predicted. Accordingly, we saw no reaction to this report in this morning’s bond trading or mortgage pricing.

Medium

Unknown

Univ of Mich Consumer Sentiment (Rev)

This week’s economic calendar comes to a close tomorrow morning with two relevant reports set for release at 10:00 AM ET. December's revised Index of Consumer Sentiment from the University of Michigan will be announced, giving us an indication of consumer willingness to spend. Analysts are expecting a reading of 53.3, unchanged from the initial estimate that was announced earlier this month. Bond traders would prefer to see a large decline, meaning surveyed consumers didn't feel as good about their own financial situations as many had thought. Waning confidence usually translates into softer consumer spending numbers that restrict economic growth.

Medium

Unknown

Existing Home Sales from National Assoc of Realtors

Next up will be Existing Home Sales figures from the National Association of Realtors. They are expected to announce home resales were little changed from October’s level, signaling the housing sector was flat last month. There are a couple of different housing-related reports each month, but this one by far gives us the most insight into the sector. Good news for rates would be a large decline in sales because a weakening housing sector makes broader economic growth more difficult and bonds tend to thrive in weaker economic conditions.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

Treasury Auctions (5,7,10,20,30 year)

Consumer Price Index (CPI)

Consumer Price Index (CPI)

General Bond Trends

Weekly Unemployment Claims (every Thursday)

Univ of Mich Consumer Sentiment (Rev)

Existing Home Sales from National Assoc of Realtors

Float / Lock Recommendation