Our Team Marvin Bush, Sales Associate/Team Leader DRE 01729105 Michelle Garcia, Sales Associate DRE 02101807

Rate Lock Advisory

Wednesday, July 1st

Wednesday’s bond market has opened in positive territory, but not by enough to make a dent in yesterday’s late sell-off. Stocks are mixed with the Dow up 117 points and the Nasdaq down 111 points. The bond market is currently up 2/32 (4.45%), but yesterday’s afternoon weakness will keep this morning’s mortgage rates higher than Tuesday’s early pricing by approximately .250 of a discount point.

2/32

Bonds

30 yr - 4.45%

117

Dow

52,436

111

NASDAQ

26,101

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Positive

ADP Employment

This first of this morning’s three events that we were watching was the release of June's ADP Employment report at 8:15 AM ET. It revealed 98,000 new private-sector jobs were added to the economy last month, falling short of forecasts. This report doesn’t draw nearly as much attention as the governmental version and has a softer influence on mortgage rates. We can label the report good news since any sign of weaker than predicted employment data is considered favorable for bonds.

Low

Positive

Fed Talk

Fed Chairman Warsh’s public discussion at a European Central Bank conference in Portugal this morning hasn’t give any big surprises yet. The headlines from the event so far simply reiterate that the Fed will not be comfortable with inflation above their traditional goal of 2.0% under his leadership. This is likely contributing to bonds erasing early morning losses since they are very sensitive to inflation trends.

High

Positive

ISM Index (Institute for Supply Management)

Finally, the Institute of Supply Management (ISM) gave us their June manufacturing index at 10:00 AM ET this morning, announcing a reading of 53.3 that was lower than the 53.8 that was expected and a decline from May’s 54.0. The lower reading means fewer surveyed manufacturing executives felt business conditions improved during the month than did in May. As a sign of slowing manufacturing activity, the report is good news for bonds and mortgage rates.

High

Unknown

Employment Situation

Tomorrow brings us the release of two monthly reports, one of which is extremely important to the markets, along with the weekly unemployment update. June's Employment report will be posted at 8:30 AM ET tomorrow instead of the usual Friday release due to the Independence Day holiday. It will give us June's unemployment rate, number of new payrolls added or lost and some earnings figures. These are considered to be extremely relevant employment sector readings and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, a decline in payrolls and soft earnings that would show a slowing labor market. Weaker than expected readings should help boost bond prices and lower mortgage rates. However, stronger numbers could be quite detrimental to mortgage pricing. Analysts are expecting to see the unemployment rate hold at May's 4.3% and approximately 114,000 jobs added to the economy last month, while earnings rose 0.3%. A higher unemployment rate, fewer new jobs and a smaller increase in earnings would be considered favorable news for rates.

Low

Unknown

Weekly Unemployment Claims (every Thursday)

Also at 8:30 AM ET will be the release of last week’s unemployment figures. They are expected to show 220,000 new claims for jobless benefits were filed, up from the previous week’s 215,000 initial filings. Good news for rates would be a large increase in claims, but the monthly Employment report will have a much stronger influence on tomorrow’s bond trading and mortgage pricing than this weekly update.

Medium

Unknown

Factory Orders

The day's final report will come at 10:00 AM ET when May's Factory Orders data will give us an indication of manufacturing strength. It is similar to the Durable Goods Orders report that was released last week but covers both durable and non-durable goods. It usually doesn't have as much of an impact on the bond market as the durable goods data does, meaning there is no reason to believe this report will heavily influence the markets or mortgage pricing. A much smaller than predicted increase would be good news even though it likely will have little impact on the day's rates. The Employment report will definitely take centerstage tomorrow.

Low

Unknown

Holiday Schedule

Also worth noting is this week's holiday schedule. The bond market will close at 2:00 PM ET tomorrow afternoon ahead of Friday's Independence Day holiday and will reopen for regular trading next Monday. Stocks will trade a full day tomorrow, but will be closed Friday. The holiday hours sometimes create pressure in the bond market as traders look to protect themselves while U.S. markets are closed for the extended weekend.

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.

The Bush Team @ Miramar International DRE 01357148

3400 Calloway Drive #700
BAKERSFIELD, CA 93312
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