Service sector grows slower than expected

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Published Date 8/3/2017

Today's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are moving sideways so far today. The MBS market worsened by -1 bps yesterday. This was not enough to worsen mortgage rates or fees. The market experienced moderate volatility yesterday.

Today's Rate Forecast: Neutral

Jobs: The July Challenger-Grey Job Cuts report showed announced corporate layoffs dropped to 28,307 which is a very lower number. Initial Weekly Jobless Claims hit 240K vs est of 242K. The more closely watched 4-week moving average dropped to 241,750.

Services: The July ISM Non-Manufacturing report (2/3 of our economy) showed a nice expansionary pace of 53.9. Any reading above 50.0 is positive. However, the markets were expecting a much stronger pace of growth in the 57.0 range, so this is a disappointment.

Factory Orders: Were higher than expected in June (3.0% vs est of 2.9%) and May was revised upward significantly from -0.8% to -0.3%.

Geopolitical: Trade War looming. President Trump is set to sign a memo on Friday that will address huge trade violations by China on intellectual property. China has vowed to retaliate in kind on soy and other imports from the U.S.

Credit card maxed out: "Winter is Coming". Our nation's debt ceiling fast approaching and the markets are concerned that there may be a short term technical default as all sides in Congress seem far apart.

Great Britain: The Bank of England kept their key interest rate at 0.25% with a 6-2 vote. Last time around the vote was 5-3. They also lowered their 2017 and 2018 GDP projections by 0.01. BofE Governor Mark Carney said that if their economy grows the way that they think it will, then a rate hike is in the cards for November.

Today's Potential Rate Volatility: Low

The economic news noted above is a mixed bag and as a result, mortgage rates are likely to be flat with low volatility again today. Tomorrow we could see increased volatility with the jobs data.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

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