Tuesday, July 1st
Tuesday’s bond market has opened in negative territory following stronger than expected manufacturing news. Stocks are mixed with the Dow up 101 points and the Nasdaq down 56 points. The bond market is currently down 5/32 (4.24%), but strength late yesterday should allow this morning’s mortgage rates to be approximately .125 of a discount point lower than Monday’s early pricing.
5/32
Bonds
30 yr - 4.24%
101
Dow
44,196
56
NASDAQ
20,312
Trailing 90 Days - National Average
Medium
Neutral
Fed Chairman Powell’s comments this morning in Portugal failed to give us any surprises. He basically reiterated that the Fed is willing to wait and see how much of an impact President Trump’s tariff plans will have on inflation and the U.S. economy before cutting key short-term interest rates again. This is pretty much the same message that he has given over the past couple of months. Accordingly, his words have not caused much of a reaction in this morning’s bond trading or mortgage pricing.
High
Negative
The Institute of Supply Management (ISM) announced at 10:00 AM ET that their June manufacturing index stood at 49.0. This was a small increase from May’s 48.5, meaning surveyed manufacturing executives felt business was slightly better last month than it was in May. Since this is a sign of economic strength, we have to consider the report to be bad news for mortgage rates.
High
Unknown
We are also watching for a reaction in the bond market to the pending Senate spending bill in Washington DC. How much the bill will add to the U.S. deficit depends on what source you are using. The bottom line is that it is expected to raise the deficit instead of reducing it. It is important to keep in mind that the U.S. government sells debt to fund most of the deficit each year. If the amount that the deficit will rise once the bill becomes law is more than bond traders were expecting, it is safe to assume we will see a negative reaction in the bond market. More supply in the market without stronger demand leads to current bonds being sold at a discount, driving yields (and mortgage rates) higher. There may be some skepticism with traders that the package will pass both chambers of Congress in its current form. We will find the answer to that question in the coming days.
Medium
Unknown
Tomorrow’s sole relevant economic report will be June's ADP Employment report at 8:15 AM ET. This report predicts changes in private-sector jobs, using the company's clients that use them for payroll processing as a base. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is known to not be accurate in predicting results of the monthly government report that follows a couple days later. Still, because we sometimes see a noticeable reaction to the report, it is on this week's calendar. It is expected to show approximately 100,000 private sector jobs were added during the month. A much smaller number would be good news for mortgage rates.
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.