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. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending:
Neutral
Mortgage rates are trending sideways
so far
today. Last week the MBS market
improved by +60bps. This
was enough to move rates or frees lower last week. We saw moderate rate volatility
through the week.
This Week's Rate Forecast:
Neutral
Three Things: These are the three areas that have the greatest ability to rates this week. 1) Domestic, 2) The Fed, and 3) Treasury Dump
1) Domestic: The two major focus points this week will be Tuesday's CPI, which will be closely monitored for inflation both on a MOM and a YOY basis after last week's huge surge in PPI. Next up is Thursday's Retail Sales report, which after the prior's month's negative reading, is also expected to surge because this period does not have the bad weather as the prior period. Plus, this period has the impact of the $1,400 per person checks and reopenings of some parts of our economy. The high-frequency Initial Weekly Jobless Claims data will be largely ignored due to Spring Break and other seasonality factors.
2) The Fed: We get more soothing-dovish tones from Fed Chair Powell this week, who seemingly pops his head up each week to offset the strong economic data and spread his "transitory" message and dovish cheer. We also hear from several other prominent Fed's, here is this week's schedule:
- 04/12 Eric Rosengren
- 04/13 Esther George, Mary Daly, and Raphael Bostic
- 04/14 Fed Chair Powell, John Williams, Robert Kaplan, Fed's Beige Book
- 04/15 Loretta Mester
3) Treasury Dump: We have a huge week for dumping our debt into the marketplace; how well it is received will have an impact on the yield curve:
- 04/12 $58B 3 year note, $38B 10Y note
- 04/13 $24B 30 year Bond
This Week's Potential Volatility:
High
We're not expecting a lot of volatility today, but we could see a spike depending on how the 10-year note auction goes this afternoon. However, we expect a good deal of rate volatility this week with the important inflationary data. We'll pay particularly close attention to Tuesday's CPI and Thursday's retail sales. The stronger those reports, the more likely we'll see rate volatility spike and rates push higher. 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. |