Daily Rate Lock Advisory | Americanheromortgage

Indexes Affecting Rate Lock

Medium

Unknown

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

Tuesday also lacks any relevant economic releases, but there is a 20-year Treasury Bond auction to start this week’s activities. If the sale is met with a strong demand from investors like last week’s sales were, bond prices may rise and mortgage rates could revise lower after results are announced at 1:00 PM ET. On the other hand, a lackluster interest in the securities may create selling in the broader bond market that leads to a slight upward revision to mortgage rates during afternoon trading.

High

Unknown

Retail Sales

Wednesday will start with the release of August's Retail Sales report at 8:30 AM ET Tuesday. This report will give us details about consumer spending, which is highly important to the markets because that category makes up over two-thirds of the U.S. economy. If consumer spending is strong, overall economic growth is likely to be stronger, making bonds less attractive to investors. If we see weaker than expected readings in this report, the bond market should respond favorably, pushing mortgage rates lower. Current forecasts show a 0.8% increase in sales. Good news for the bond market and mortgage pricing would be a much smaller increase, or better yet- a decline.

High

Unknown

Federal Open Market Committee (FOMC) Statement

Next up is the much anticipated FOMC meeting Wednesday afternoon. Not too long ago, there was plenty of debate regarding whether or not the Fed would raise key short-term interest rates before the end of the year. The upcoming meeting had a relatively low chance of them making a move according to analysts’ predictions. Last week changed those odds drastically. The significant spike in oil prices that brought one benchmark above $105 per barrel, the fact the Iran war not only has no end in sight but is now expanding to other countries in the Middle East and inflation data that didn’t ease concerns drove bond yields to a high point we haven’t seen in many years. This led to a jump in mortgage rates because they tend to track bond yields.

High

Unknown

Federal Open Market Committee (FOMC) Statement

The chance of a rate hike coming during this week’s meeting is now very high. If the Fed does bump key rates this week to bring inflation down, it will be the first hike since July of 2023. The Federal Reserve raises rates when they want to slow economic activity and bring inflation down, while lowering them is intended to boost economic growth when it is too slow. Now that a potential rate hike is right in front of us, it is important to remember that the Fed’s goals are in line with what the bond market wants to see also. Rising inflation makes a long-term bond’s future fixed interest payments less appealing to investors today. This is why bond prices have been moving lower, pushing their yields (and mortgage rates) higher. If the Fed is successful in bringing inflation back down near their 2.00% target rate, bonds should thrive and mortgage rates would move lower. In other words, don’t be surprised to see a bond rally and mortgage rates move lower if the Fed does take action at this week’s meeting. However, if they don’t make a move this week, we could see bond yields and mortgage rates rise higher than where they closed at Friday afternoon.

High

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Misc Fed

The meeting will adjourn at 2:00 PM ET Wednesday, which is also when we will get their post-meeting statement and revised economic projections. Those economic projections also include the Fed's so-called Dot Plot that tells us where individual Fed members think these short-term rates will be in the future. This is another way the Fed is telling us what they think will happen to key rates in the future. It is safe to assume we will see a great deal of volatility in the markets and mortgage rates Wednesday.

Low

Unknown

Housing Starts (New Home Construction)

August's Housing Starts report will be posted at 8:30 AM ET Thursday. This report will probably not have a heavy impact on the bond market or mortgage rates. It helps us measure housing sector strength and future mortgage credit demand by tracking new home groundbreakings. It is expected to show new home groundbreakings rose a little from July, pointing to a bit of strength in the new home portion of the housing sector. We need to see a significant surprise in this data for it to have a noticeable influence on mortgage rates.

Medium

Unknown

Industrial Production

Friday has two moderately important economic reports scheduled for release. Industrial Production data for August is set to be released at 9:15 AM ET. It will give us an indication of manufacturing strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting to see production was 0.3% higher than it was in July, a sign that manufacturing activity gained modest momentum last month. A larger increase in production would be negative for bonds and mortgage rates, while a decline would be favorable for mortgage shoppers.

Medium

Unknown

Leading Economic Indicators (LEI) from the Conference Board

The Conference Board will close this week's calendar when they release their Leading Economic Indicators (LEI) for August at 10:00 AM ET Friday. This index attempts to predict economic activity over the next three to six months. Forecasts show a 0.2% increase, meaning the indicators are pointing toward slightly stronger economic activity in the coming months. A decline in the indicators would be favorable news for mortgage pricing.

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Unknown

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Overall, Wednesday is easily the most important day of the week since it has the most influential data and FOMC events. We may see rates move in the morning and again, at least once maybe more, during late afternoon hours. The calmest day for rates will probably be Friday since weekend headlines from the Middle East may draw a reaction tomorrow. We are likely going to see plenty of movement in the financial markets and mortgage rates this week, so it would be prudent to keep an eye on them if floating an interest rate and closing in the near future.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

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

Retail Sales

Federal Open Market Committee (FOMC) Statement

Federal Open Market Committee (FOMC) Statement

Misc Fed

Housing Starts (New Home Construction)

Industrial Production

Leading Economic Indicators (LEI) from the Conference Board

none

Float / Lock Recommendation