Rate Lock Advisory

Tuesday, August 11th

Tuesday’s bond market has opened well in negative territory following overnight pandemic news and much stronger than expected inflation news. Stocks are mixed but active with the Dow up 300 points during early trading and the Nasdaq down 60 points. The bond market is currently down 18/32 (0.64%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.

18/32


Bonds


30 yr - 0.64%

300


Dow


28,091

60


NASDAQ


10,908

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High


Negative


Producer Price Index (PPI)

Today’s only relevant economic data was July's Producer Price Index (PPI) at 8:30 AM ET that revealed a 0.6% rise in the overall reading and 0.5% increase in the more important core data. Both readings were well above forecasts of 0.3% and 0.1% respectively, indicating inflationary pressures at the producer level of the economy were stronger than thought last month. Accordingly, we can consider the data bad news for bonds and mortgage rates as rising inflation makes long-term securities, such as mortgage bonds, less appealing to investors.

Medium


Negative


COVID-19 News

This morning’s data is only part of the reason for the weak open in bonds. Overnight news that Russia claims to have developed a COVID-19 vaccine had bonds in negative ground before the PPI was released. Optimism about another stimulus package to boost economic activity is rising, also affecting this morning’s trading.

High


Unknown


Consumer Price Index (CPI)

The sister release to today’s PPI report, July's Consumer Price Index (CPI), will be posted at 8:30 AM ET tomorrow morning. This is normally one of the more important reports for the bond market each month because it measures inflation at the consumer level of the economy. Forecasts are showing a 0.3% rise in the overall reading and a 0.2% increase in the more important core data. As with today’s version, there are two major readings to this release. Weaker readings should help lead to lower mortgage rates since it would mean inflationary pressures at the consumer level of the economy remain subdued.

Medium


Unknown


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

We also have the first of this week’s two Treasury auctions taking place tomorrow that may affect rates. 10-year Notes will be sold tomorrow while 30-year Bonds sell Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds is good, the earlier losses are often recovered after the results are announced. Results of sales will be posted at 1:00 PM ET of each auction day, making these early afternoon events 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... 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.


Diamond Mortgage, LLC

14074 Trade Center Drive Suite 255
Fishers, IN 46038