Small business optimism remains historically high

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Published Date 4/10/2018

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 to slightly higher so far today. The MBS market worsened by -1 bps yesterday. This wasn't enough to worsen mortgage rates or fees. The rates experienced low volatility yesterday.

Today's Rate Forecast: Neutral

Small Business Optimism: The March NFIB reading hit 104.7, pulling back a smidge from Feb's 45-year high level but still at a very elevated level (top 5% of all time). Some key areas increased -employment rose 2 points to a net 20 percent, and current job openings rose 1 point to a net 35 percent. Labor remains the primary problem for small business owners for the third straight month, according to NFIB, with 89 percent of those hiring or trying to hire reporting few or no qualified applicants.

Inflation: The March Producer Price Index got a "three handle" and hit a six-year high with YOY Headline PPI coming in 3.0% vs est of 2.9% and Feb's pace of 2.8%. The Core YOY PPI hit a seven-year high with a 2.7% reading vs. est of 2.6% and Feb's pace of 2.5%.

Wholesale Trade Inventories: The Final Feb reading came in at 1.0% vs est of 0.9%.

Central Bank:

ECB: Gov Ewald Nowotny (a noted "hawk") said that "I would have no problem with moving from -0.4% to -0.2% as a first step and then, as a second step, include the (main refinancing) policy rate,” he said. “This is the structure. The exact timing? It’s too early to tell you,” he added. He also indicated that he favored ending their bond-buying program this year.

Fed: Dallas Fed President Robert Kaplan is in Beijing and said that he is "optimistic" that very few if any of the proposed tariffs by the United States and China announced in recent weeks will actually be implemented.

Debt Dump: Today we have our 3-year Treasury note auction at 1 PM.

Today's Potential Rate Volatility: Average

Mortgage rates and the equity markets are focused on the trade tensions with China. Chinese President Xi made a step forward last night saying US companies will have more access to their financial and auto markets. This is helping to push stocks higher. Rates, however, are remaining relatively flat with a lack of volatility.

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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