Rate Lock Advisory

Wednesday, October 2nd

Wednesday’s bond market has opened in negative territory, partly due to stronger than expected economic data. Bonds were posting losses during overnight trading, but definitely extended them after the data was announced. Stocks are showing minor losses with the Dow down 24 points and the Nasdaq down 39 points. The bond market is currently down 18/32 (3.80%), which should cause an increase in this morning’s mortgage rates of approximately .125 of a discount point.

18/32

Bonds

30 yr - 3.80%

24

Dow

42,132

39

NASDAQ

17,871

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Negative

ADP Employment

Today’s sole economic release was September's ADP Employment report at 8:15 AM ET. It revealed 143,000 new private-sector jobs were added to the economy last month. This was much more than the 120,000 that analysts were expecting and a sizable jump from August’s revised 103,000 new payrolls. The jump of 40,000 is a sign of employment strength and raises some concerns about what Friday’s governmental Employment report is going to show. Perceived weakness in the employment sector heavily contributed to the August and early September bond rally that drove mortgage rates lower. If the sector starts to show clear signs of strengthening, we could be in for higher bond yields and mortgage rates. It is worth noting though, today’s report often is not a reliable indicator of what Friday’s version will show. This morning’s losses can easily be erased with favorable results Friday morning.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

There are three pieces of relevant economic data coming tomorrow morning. First will be another employment-related release at 8:30 AM ET. The weekly unemployment update is expected to show 222,000 new claims for benefits were made last week. This would be an increase from the previous week’s 218,000 and hint at a weakening employment sector. A much large number would be good news for rates. Rising claims are generally favorable for bonds, but because this is only a weekly snapshot, it usually takes a wide variance from forecasts to have a noticeable impact on mortgage pricing.

Medium

Unknown

ISM Service Index

Next up is the Institute for Supply Management’s (ISM) non-manufacturing index at 10:00 AM ET, also known as the services index. As with its sister manufacturing index that was announced yesterday morning, it is expected to show little change from August’s 51.5. Favorable news for bonds and mortgage rates would be a sign of softening sentiment, signaling the service sector may be slowing. A drop below the 50.0 threshold would be considered very good news for rates.

Medium

Unknown

Factory Orders

August's Factory Orders data will also be posted at 10:00 AM, which is similar to last week's Durable Goods Orders update except this version includes orders for both durable and non-durable goods. Forecasts are calling for a 0.1% increase in new orders. A decline would be good news for the bond market and mortgage rates while a larger rise would be bad news. Since a good portion of the data was already released last week, it is unlikely that this report will have a big impact on tomorrow’s mortgage pricing. The other two releases, along with any new geopolitical news, will drive bond trading tomorrow.

Float / Lock Recommendation

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.

Norcal Capital Group, Inc

1369 El Camino Real
Millbrae, CA 94030
Equal Housing LenderEqual Housing Opportunity
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