18 Aug No clear rush to lock
Mortgage bonds opened above their 25 day moving average, after finding strength following yesterday’s release of the Fed Meeting Minutes. Overall, the minutes show a more hawkish Fed and increase the odds of a Fed rate hike before the end of 2016. The minutes sited stronger employment growth as a primary reason to justify a hike. However, they did state concern over continued subdued inflation which could soften even more following a rate hike. With the election coming, it is unlikely to see a rate hike at the September meeting. A rate hike would likely increase volatility in both the stock and bond markets, which could show poorly for the current democratic administration. In an effort to be fair, they will likely hold off until after the election before making such move.
Initial Jobless Claims, which measures individuals filing for first time unemployment benefits, feel 4,000 from the 266,000 reported the week prior down to 262,000. This was slightly lower than the 265,000 anticipated by the markets. This week’s report is the most significant of the month, as it will be used by the Bureau of Labor Statistics to determine the number of new hires in the month of August. Overall, new claims continue to show strength in the job market, providing continued justification for a Fed rate hike.
With bonds above their 25 day moving average, there is no immediate need to rush to lock at the moment. However, it does provide an opportunity to take advantage of the small improvement to mortgage APR pricing if you need to close in the near term.