Ryan's Rate Commentary

  • 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. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.

    Rates Currently Trending: NEUTRAL
    Mortgage rates are trending sideways higher this so far today. Last week the MBS market worsened by -102 bps. This moved mortgage rates higher last week. Mortgage rate volatility was high last week.

    This Week's Rate Forecast: NEUTRAL
    Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week: 1) Government Shutdown 2) Fed and 3) Across the Pond.

    1) Government Shutdown:
    Here we go, another deadline this week for a Government shutdown. Will we get yet another emergency measure to "kick the can" for another two weeks? Or with the two sides so far apart will we finally get the promised shutdown? Or will there be a miracle and both sides will come to a long-term agreement?

    2) Fed:
    Yellen is gone. Today, Jerome Powell will officially be sworn in as our Fed Chair, and the new reign will begin. The bond market views him as a little more pragmatic than uber-dove Yellen. We are waiting to see who the new Vice Chair will be. Here is a list of speeches this week:

    • 02/05 - Jerome Powell
    • 02/06 - James Bullard
    • 02/07 - William Dudely, Charles Evans, John Williams
    • 02/08 - Robert Kaplan, Neel Kashkari
    • 02/09 - Esther George

    3) Across the Pond: The spotlight will be on the Bank of England's Central Bank meeting on Thursday. We will also hear from key BofJ and ECB representatives. There will also be some movement in the Brexit situation and key reports out of China.

    Treasury Auctions this Week:
    • 02/06 3 year note
    • 02/07 10 year note
    • 02/08 30 year bond

    This Week's Potential Volatility: HIGH
    The manufacturing numbers are helping to push mortgage rates a bit higher today. The one thing that can help keep a lid on mortgage rates is the potential of a government shutdown. If that somehow gets resolved quickly, we could see mortgage rates push higher with increased volatility this week.

    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.

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