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 this morning. Last week the MBS market improved by +3bps. This moved mortgage rates sideways last week. We could see increased rate volatility this 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) Fed, 2) Jobs and 3) Domestic.

    1) Fed:
    The Federal Reserve Open Market Committee (FOMC) will start two days of meetings on Tuesday and Wednesday at 2:00 pm ET. They'll release their latest interest rate decision and policy statement. Currently, the market only has about a 33% chance baked in of a rate hike at this meeting primarily because it does not have a live press conference with the Fed Chair Jerome Powell.

    2) Jobs:
    We get a tremendous amount of labor and or wage-related data this week that culminates in Friday's Unemployment Report. The bond market will be paying very close attention to the first revision to the March NFP report and the YOY Average Hourly Earnings which came in at 2.7% in March. Throughout the week, we have ADP Private Payrolls, Challenger Job Cuts, Initial Weekly Jobless Claims, Unit Labor Costs, and some internal components of Chicago PMI and the ISM releases.

    3) Domestic Flavor:
    Besides a bevy of jobs related data, we get some significant releases this week. We start off with PCE (The Fed's official measure of inflation) and key readings in manufacturing with Chicago PMI, ISM Manufacturing, Factory Orders and Productivity. We also receive data on the services sector which is more than 2/3 of our economy with the ISM Non-Manufacturing reading.

    This Week's Potential Volatility: HIGH
    Mortgage rate volatility is liable to be relatively low today. The rest of the week is a totally different story. As denoted above, we receive a lot of jobs and inflation related data that has the ability to move rates higher or lower.

    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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