Three things that can move rates this week

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Published Date 5/11/2020

This Week'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 -24 bps last week. This caused rates or fees to move slightly higher for the week. The rates experienced low volatility throughout the 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) Coronavirus, 2) The Fed and 3) Domestic.

1) Coronavirus: The key focus this week is on the "reopening" as many more states start to partially reopen this week with safeguards in place. So far, South Korea and Germany have seen big spikes in cases after reopening some of their economies.

Here are some of this week's early headlines:

V.P. Pence in self-quarantine after exposure to a staffer that has Covid-19.
Every 1 out of 1000 people residing in NY and NJ have died from Covid-19.
China reports new cases in Wuhan after reopening.
All eyes are on U.S./China Trade and "saber-rattling."
Global cases north of 4.1M, deaths 283K.
US cases >1.3M, deaths > 80K.

2) The Fed: The Federal Reserve Bank of NY will continue its "taper" of their daily MBS purchases. They have decreased the amount of purchases each week for the past 7 weeks. It will now drop to approximately $1.08B in 2.50 coupons daily. That is down from $1.32B last week. We have a large slate of speakers this week with the focus on a newly announced speech by Powell on Wednesday.

05/11 Charles Evans
05/12 James Bullard, Randal Quarles, Patrick Harker, and Loretta Mester
05/13 Jerome Powell and Atlanta Fed Business Inflation
05/14 Neel Kashkari, Robert Kaplan, and Fed's Balance Sheet

3) Domestic Flavor: We have several key reports this week with Initial Claims once again getting the most weight. However, we get key inflation readings with CPI, PPI, and Import Prices. We also will get the retail sales numbers.

Treasury Dump: Here is this week's Treasury auction schedule

05/11 3 year note
05/12 10 year note
05/13 30 year bond

This Week's Potential Volatility: Low

Once again this week, we expect rates to trade in a tight channel with relatively low volatility. This story has played out the same way for weeks now. It will take something very unexpected to push rates out of the well-established range.

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.