Daily Rate Lock Advisory

Indexes Affecting Rate Lock

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Existing Home Sales from National Assoc of Realtors

July's Existing Home Sales report from the National Association of Realtors will start this week’s activities at 10:00 AM ET Tuesday. This report gives us detailed insight into the housing sector. It covers a high percentage of all home sales in the U.S., but usually does not have a major influence on bond trading and mortgage rates unless it varies greatly from analysts' forecasts. It is expected to show a slight decline from June's sales, meaning the housing sector softened modestly last month. A weakening housing sector makes broader economic growth less likely. Accordingly, good news for rates would be a noticeable decline in sales.

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Consumer Price Index (CPI)

July's Consumer Price Index (CPI) early Wednesday morning is the first major piece of data that we need to be concerned about. The CPI is one of the most important reports for the bond market each month, particularly with inflation such a hot topic at the moment. Forecasts show a 0.1% rise in the overall reading and a 0.2% increase in the more important core data that excludes volatile food and energy prices. Annual readings are expected to decline from June's pace. Good news for mortgage rates would be weaker than predicted readings. However, stronger inflation readings would put the Fed in a more difficult position after July's Employment report last Friday showed the other half of their dual mandate (maximum employment) was much softer than thought.

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

Wednesday also has the first of the two long-term Treasury auctions that may affect mortgage rates during afternoon trading. 10-year Treasury Notes are being sold Wednesday, followed by 30-year Bonds Thursday with results being posted at 1:00 PM ET each day. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading Wednesday and Thursday. However, a weak interest could lead to broader selling in the bond market that may push mortgage rates higher.

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Producer Price Index (PPI)

We get more highly important data Thursday morning when July's Producer Price Index (PPI) is posted at 8:30 AM ET. It will give us an important measure of inflationary pressures at the wholesale level of the economy instead of the consumer level. Analysts are predicting an increase of 0.1% in the overall index and a rise of 0.3% in the core data for July. Good news for rates should be softer readings both monthly and annually, partly because stronger wholesale inflation often carries into the consumer level of the economy eventually.

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Retail Sales

The week's calendar closes Friday with two more pieces of data, including another major economic release. The report drawing the most attention Friday will be July's Retail Sales at 8:30 AM ET that tracks consumer spending. This category makes up over two-thirds of the U.S. economy, so analysts pay close attention to related data. Forecasts have sales rising 0.2%, indicating consumers spent more last month than they did in June. Because this category is a key part of the overall economy and bonds tend to thrive in softer economic conditions, weaker sales would be good news for bonds and mortgage rates.

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Univ of Mich Consumer Sentiment (Prelim)

The last release of the week will come from the University of Michigan late Friday morning. Their Index of Consumer Sentiment for August will give us an indication of consumer confidence that projects consumer willingness to spend. If consumer confidence in their own financial and employment situations are rising, they are more apt to make large purchases in the near future. On the other hand, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 54.2 that would mean confidence is a little weaker this month than July's level of 55.2. Favorable news for mortgage rates would be a sizable decline.

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Overall, Wednesday is likely to be the most active day for rates due to the importance the consumer inflation data carries and the afternoon Treasury auction, but Thursday and Friday’s data also has the potential to cause a noticeable revision in rates. The calmest day could be Tuesday since this weekend’s Middle East headlines may move rates tomorrow. We should see plenty of movement in rates this week, especially the middle and latter day. Accordingly, please proceed cautiously if still floating an interest rate and closing in the near future.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

Existing Home Sales from National Assoc of Realtors

Consumer Price Index (CPI)

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

Producer Price Index (PPI)

Retail Sales

Univ of Mich Consumer Sentiment (Prelim)

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Float / Lock Recommendation