Daily Rate Lock Advisory

Indexes Affecting Rate Lock

Low

Neutral

General Bond Trends

Yesterday’s 20-year Treasury Bond auction drew a demand from investors that can be labeled as below-average, at best. A couple of the benchmarks we use to gauge how well the sale went indicated a lackluster interest in the securities. Fortunately, this wasn’t a surprise considering everything else going on in the bond world right now, preventing a noticeable reaction to the 1:00 PM ET results announcement. We are labeling the sale unfavorable, but the auction didn’t actually have an impact on mortgage pricing.

High

Negative

Retail Sales

Today’s activities began with the release of August's Retail Sales report at 8:30 AM ET. It showed consumers spent much more than anticipated last month despite higher fuel costs. The 1.2% rise in retail-level spending was well above the 0.8% that was expected. Furthermore, a secondary reading that excludes more volatile and costly auto transactions jumped 1.4% when it was predicted to be up 0.5%. These numbers indicate consumers weren’t afraid to spend last month, making the report bad news for mortgage rates because stronger consumer spending fuels economic growth.

High

Unknown

Federal Open Market Committee (FOMC) Statement

Next is the 2:00 PM ET FOMC meeting adjournment and related events. The markets are expecting to hear that key short-term interest rates were raised by at least a quarter-point, the first Fed rate hike since July 2023. More importantly though, traders are extremely interested in what the post-meeting statement says, along with the dot-plot that reflects where each individual FOMC member feels these rates will be in the future. The bond market needs to see/hear that the Fed is acknowledging there is an inflation problem AND that they will remain aggressive to bring it lower. A quarter-point bump with no message that they are prepared to act again if needed would likely draw a negative response in the bond market, leading to higher mortgage rates.

High

Unknown

Inflation News

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 closer to their 2.00% target rate, bonds should thrive and mortgage rates would move lower. In other words, a rate hike today with messaging that eases bond traders concerns should cause a bond rally and lower mortgage rates. However, if they don’t make a move for some reason, leaving rates unchanged at this meeting, we could see bond yields and mortgage rates rise even higher than current levels.

High

Unknown

Federal Open Market Committee (FOMC) Statement

The meeting will adjourn at 2:00 PM ET, which is also when we will get their post-meeting statement and revised economic projections and dot-plot. It is safe to assume we will see a great deal of volatility in the markets and mortgage rates this afternoon, so be prepared if still floating an interest rate.

Medium

Unknown

Housing Starts (New Home Construction)

Tomorrow morning brings us the release of two minor economic reports (weekly unemployment claims and Housing Starts). They will be addressed in this afternoon’s update that will be posted shortly after the markets have an opportunity to react to the FOMC events.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

General Bond Trends

Retail Sales

Federal Open Market Committee (FOMC) Statement

Inflation News

Federal Open Market Committee (FOMC) Statement

Housing Starts (New Home Construction)

Float / Lock Recommendation