Market Focus: Jobs numbers, central banks, and coronavirus

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Published Date 5/7/2020

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 worsened by -7 bps yesterday. This caused rates or fees to move sideways for the day. The rates experienced slightly elevated volatility yesterday.

Today's Rate Forecast: Neutral

Jobs: The April Challenger Grey Corporate Job Cuts report jumped to 671K vs. March's pace of 222K. Initial Weekly Jobless Claims added another 3.169M to the unemployment ranks, which was close to market expectations of 3.0M. Continuing Jobless Claims rose to yet another new record high of 22.647M. The seven-week tally is now 33.5M weekly claims.

Manufacturing: The 1st QTR Non-Farm Productivity contracted by -2.5%, but that is actually much better than expectations of a contraction of -5.5%. Unit Labor Costs soared by 4.8% vs. the 4th QTRs pace of only 0.9%.

Central Bank: The Bank of England kept its key interest rate at 0.1%, which was widely expected. However, there were a few twists as some of the members wanted to increase Q.E. by $100B, which is letting the market knowing that it could be possible to pass at their June meeting. They also warned that we could see the worst economic slump in 300 years.

The Fed: Minneapolis Fed President, Neel Kashkari, said that the Friday jobs report that covers April will likely show an unemployment rate of 16% or 17%, but that the real number is around 23% or 24%, adding that "it's devastating."

Coronavirus: Here are this morning's headlines.

Johns Hopkins said it had recorded the largest number of new coronavirus infections worldwide on Wednesday in two weeks, the latest sign that reopening economies has led to a slight pickup in the infection rate. New confirmed infections on Wednesday topped 92,700, the most since April 24, and the 4th-highest daily total yet.
Global cases now >3.75M, deaths >264K
Up to 43 U.S. states will partially open by Sunday.
N.Y. Gov Cuomo says up to 66% of all new cases are people who were home.

Today's Potential Rate Volatility: Low

Rate volatility is muted so far today. Now that the jobs numbers have been released, the likelihood of increased rate volatility is low today. Look for rates to continue in a very tight channel.

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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