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 to slightly higher this morning. Last week the MBS market improved by +1bps. This wasn't enough to push rates lower. Mortgage rate volatility has been low the last few days.

    This Week's Rate Forecast: NEUTRAL
    Three Things: These are the three things that have the greatest ability to impact mortgage rates this week. 1) Geopolitical, 2) Domestic, 3) Across the Pond.

    1) Geopolitical:
    The trade/tariff concern with China will continue to be a significant focus of long bond traders this week. But now we will sprinkle the Iran sanctions on top of that as the current arrangement expires by the end of this week. NAFTA talks will also resume this week

    2) Domestic:
    The most important data point this week is Thursday's Consumer Price Index as we look to see if last week's story of inflation keeps on moving forward. We also get the Producer Price Index as well as Import Prices as measures of inflation.

    3) Across the Pond:
    We will get the Bank of England's latest interest rate and policy statement. We will also get the minutes from the last Bank of Japan meeting and key PPI and CPI readings out of China.

    Treasury Auctions this Week:
    • 05/08 3 year note
    • 05/09 10 year note
    • 05/10 30 year bond

    • 05/07 Tom Barkin, Robert Kaplan and Charles Evans
    • 05/09 Raphael Bostic
    • 05/10 Fed's Balance Sheet
    • 05/11 James Bullard

    This Week's Potential Volatility: AVERAGE
    Over the last two weeks, mortgage rates have traded in the same channel. The big piece of economic news that could cause volatility and push mortgage rates out of the channel comes on Thursday with CPI. Other than that, it will take an unexpected geopolitical event to push rates significantly.

    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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