Here's why an inverted yield curve is important

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Published Date 12/4/2018

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 so far today. The MBS market improved by -+10 bps yesterday. This may've been enough to slightly improve rates or fees. The rates experienced moderate to high volatility yesterday.

Today's Rate Forecast: Neutral

Yield Curve: The yield curve is inverting, investors and analysts seeing the inversion as the historical signal that the economy may be heading for a recession. The inversion between the 2 and 5 isn’t much, but it is supporting the long end of the curve; 2 yr note at 2.831%, the 5 at 2.822%, the first inversion, albeit not much, the first since Sept 2007. The 10 yield down 3 bps from yesterday’s close at 9:00 am. The German 10 yr bund 0.289%, Japan’s 10yr 0.069%. The spread between the 2 and the 10 yr at 9:00 am 20 bps.

Business Conditions: The November ISM NY remained at near historical highs with a reading of 67.8 which is just off its best reading (last month) of 69.8

Fed: NY Fed President John Williams will speak today at 10.

Australia: The Reserve Bank of Australia kept their key interest rate at 1.5%

Eurozone: PPI YOY 4.9% vs est of 4.5%.

Today's Potential Rate Volatility: Low

Mortgage rates continue to drift lower on relatively low volatility. We expect the same for today. Markets will be closed Wednesday as President Trump designated it a national day of mourning in honor of George H.W. Bush, who died Friday night at age 94.

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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