Market Commentary

July 13, 2020

THREE THINGS THAT CAN MOVE RATES THIS WEEK

 

THIS WEEK'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 trending sideways to slightly higher so far today.  Last week the MBS market improved by +31bps.  This was enough to move rates or fees lower. 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 impact your backend pricing this week. 1) Coronavirus, 2) Central Bank, and 3) Domestic.

1) Coronavirus: Last week's pricing gains were directly attributed to increases in the Covid-19 cases in the U.S. and its long lasting impact on our economy. This week, the news is more of the same, increased cases globally and domestically and more counties/states announcing pauses or reversals of opening phases. ICU and hospital bed usage continue to rise although the death rate continues to fall.

2) Central Bank: We have a very big week for Central Banks as we get very key interest rate decisions and policy statements from The Bank of Japan, The Bank of Canada and the European Central Bank. We also get our Fed's Beige Book (which is prepared in advance of our next Fed Meeting).

3) Domestic: We have several big economic reports this week that will get the attention of traders like CPI and Retail Sales, but its the weekly Initial Jobless Claims data that will get the most weight.

THIS WEEK'S POTENTIAL VOLATILITY: AVERAGE

Rate volatility has been very low the last few weeks. However, we could see increased volatility this week with growing concerns over the coronavirus and jobless claims numbers.

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