Three things that could impact rates this week

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Published Date 2/26/2024

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 under pressure today. The MBS market improved by +15 bps last week. This was not enough to decrease mortgage rates or fees. The market experienced moderate volatility last week.

This week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Inflation, 2) Treasury Auction and 3) The Fed, 3a) Manufacturing.

1) Inflation: We get the Fed's key measure of inflation, Core PCE on Thursday which is expected to grow at MOM pace of 0.4% which is double the prior month's pace. Yet, YOY it is expected to move from 2.9% to 2.8%.

2) Treasury Auction: We have a record amount of 2s, 5s and 7 year notes hit the market this week. Its a massive amount of debt that needs to be absorbed into the marketplace. While there appears to be plenty of cash on the sidelines to take this offering, it will be an important week for bonds.

3) The Fed: We are fast approaching the Fed's March Meeting and their media blackout period leading up to that meeting even quicker. This week's barrage of speakers will get a lot of weight particularly after the PCE data hits:

02/26 Schmid

02/27 Barr

02/28 Bostic, Collins, Williams

02/29 Bostic, Goolsbee, Mester

03/01 Waller, Bostic, Daly, Kugler

3a) Manufacturing: We have a lot of manufacturing related data this week with ISM Manufacturing, Chicago PMI, Durable Goods, Dallas Fed Manufacturing and Richmond Fed Mfg.

This week's Potential Rate Volatility: High

This morning markets have started under mild pressure. Volatility has started at moderate levels but will increase later in the week.

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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