Market volatility spikes on Chinese central bank policy changes

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Published Date 9/24/2024

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 moving sideways today. The MBS market worsened by -4 bps yesterday. This was not enough to increase mortgage rates or fees. The market experienced moderate volatility yesterday.

Today's Rate Forecast: Neutral

Housing: July Case Shiller Home Price Index (metro city) was up 5.92% on a YOY basis versus estimates of 5.80%. The July FHFA Housing Price Index showed a MOM gain of 0.1% versus estimates of 0.2%.

The Fed: Fed Governor Bowman (the first dissenting vote since 2005 from a Governor) said "I preferred a smaller initial cut in the policy rate while the U.S. economy remains strong and inflation remains a concern," and "I cannot rule out the risk that progress on inflation could continue to stall." She also said "The U.S. economy remains strong and core inflation remains uncomfortably above our 2% target."

Manufacturing: September Richmond Fed Manufacturing continued to contract with a -18 versus -17 reading.

The Consumer: After a shock to the upside last month, we got a complete reversal this month as Consumer Confidence tanked to 98.7(anything below 100 is bad) versus estimates of 103.3.

Treasury Auction: We kick off dumping our debt into the marketplace with today's 2 year Treasury note at 1 pm ET.

Central Banks: The Reserve Bank of Australia kept their key interest rate at 4.35%. For the second straight day, the People's Bank of China made market waves as they unleashed barrage of policy easing measures this morning, including a 20BPS primary policy rate cut, a 50BPS RRR cut and a 50BPS rate cut on existing mortgages.

Today's Potential Rate Volatility: Neutral

This morning markets dropped on the China news but have since recovered. Volatility started high but has already moderated.

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

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.