Daily Rate Lock Advisory

Indexes Affecting Rate Lock

High

Negative

Employment Situation

This morning’s big news was the release of January’s Employment report at 8:30 AM ET tomorrow. It revealed the employment sector was stronger last month than many had thought. Of the three major headlines from the report, all of them are unfavorable for bonds and mortgage rates. The unemployment rate slipped from 4.4% to 4.3% while 130,000 new jobs were added to the economy. Forecasts had the unemployment rate holding at 4.4% and 65,000 new jobs. Even average earnings came in stronger than expected with a 0.4% monthly rise and a 3.7% annual pace, exceeding expectations of 0.3% and 3.6%. Accordingly, the report is clearly bad news for bonds and mortgage rates.

Medium

Negative

Fed Talk

January’s Employment data could prevent the Fed from cutting key short-term rates again in the near future. Their basis for making the three quarter-point cuts late last year was to support the employment sector that was showing signs of weakening. They made those cuts despite concerns about rising inflation that remains stubbornly higher than the Fed’s 2.0% goal. If employment appears to be gaining strength, there is no need to lower key rates since it could fuel an increase in inflation.

Medium

Unknown

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

Today also has the first of this week’s two relevant Treasury auctions. 10-year Treasury Notes are being sold today, followed by 30-year Bonds tomorrow. These sales will help us determine if there is currently a good demand for long-term debt from investors. This is relevant because mortgage rates are based on long-term mortgage bonds. If today’s sale attracts a strong interest from investors, we should see the bond market improve and mortgage rates revise lower after results are announced at 1:00 PM ET. However, a poor demand could lead to an upward revision in rates before the end of the day. This scenario will be repeated tomorrow with the 30-year Bond auction.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

Tomorrow brings us two moderately important economic releases before Friday’s extremely influential inflation report. First up tomorrow will be the weekly unemployment update at 8:30 AM ET. It is expected to show approximately 222,000 new claims for jobless benefits were made, down from the previous week’s 231,000 initial filings. Declining claims are a sign of a strengthening employment sector. Therefore, the larger the number tomorrow, the better the news for mortgage pricing.

Medium

Unknown

Existing Home Sales from National Assoc of Realtors

January's Existing Home Sales report will also be released tomorrow, but at 10:00 AM ET. This report gives us details about the housing sector. The National Association of Realtors is expected to say home resales slipped last month despite a dip in mortgage rates. Since long-term securities, such as mortgage bonds, tend to thrive during weaker economic conditions, softer home sales would be good news for mortgage rates. However, this report usually does not draw a strong reaction in the markets and often has just a minimal impact on rates.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

Employment Situation

Fed Talk

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

Weekly Unemployment Claims (every Thursday)

Existing Home Sales from National Assoc of Realtors

Float / Lock Recommendation