Rate Lock Advisory

Wednesday, May 12th

Wednesday’s bond market has opened well in negative territory due to much stronger than expected inflation data. Stocks are reacting negatively to the data also, pushing the Dow down 199 points and the Nasdaq down 164 points. The bond market is currently down 16/32 (1.67%), which should cause an increase in this morning’s mortgage rates of approximately .375 of a discount point.



30 yr - 1.67%







Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock



Consumer Price Index (CPI)

Today’s only economic release was April's Consumer Price Index (CPI) at 8:30 AM ET. This highly important report showed a 0.8% spike in the overall reading and a 0.9% jump in the core data that excludes more volatile food and energy costs. Both readings were sharply higher than forecasts of up 0.2% and 0.3% respectively. Those readings ware very bad news for bonds and mortgage rates because they support the theory that inflation is going to rapidly rise. Since inflation makes a long-term security’s future fixed interest payments less valuable today, bonds tend to suffer when inflation is a threat. Mortgage rates usually track bond yields, meaning rising inflation often leads to higher home financing costs also.



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

We also have the 10-year Treasury Note auction to watch this afternoon. Results will be posted at 1:00 PM ET, making this an early afternoon event for rates. If there was a strong demand for the securities, we may see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sales, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing this afternoon. It is hard to see this auction going well considering the inflation concerns in the markets currently and this morning’s related data.



Producer Price Index (PPI)

Next on the week’s calendar is April's Producer Price Index (PPI) at 8:30 AM ET tomorrow. This is the sister release of today’s CPI but tracks inflationary pressures at the producer level of the economy. As with the CPI, there are two readings that the markets usually look at. Forecasts are calling for a 0.3% increase in the overall reading and a 0.4% rise in the more important core data. Favorable news for mortgage rates would be smaller than expected increases.



Weekly Unemployment Claims (every Thursday)

In addition to the PPI, tomorrow will also give us last week’s unemployment figures. They are expected to show approximately 490,000 new claims for unemployment benefits were filed during the week. Declining claims is a sign the employment sector strengthened from the previous week. Therefore, the higher the number of initial claims, the better the news it is for bonds and mortgage rates.



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

The second Treasury auction that is of interest to mortgage rates will take place tomorrow also. Results of the 30-year Bond auction will be posted at 1:00 PM ET. A strong demand from investors would be good news for rates.

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... 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.

English French German Portuguese Spanish