Market Focus: China Tariff Cuts, Jobs, And Coronavirus

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 -3 bps yesterday. This caused rates or fees to move sideways for the day. The rates experienced low volatility yesterday.

TODAY’S RATE FORECAST: NEUTRAL

Jobs: The January Challenger Job Cuts report showed a surge in announced corporate layoffs from the big-name employers. The announced cuts rose from 32,843 in December to 67,735 in January. Most of those gains were due to retailers scaling back after the Christmas season as well as mall retailers continuing to downsize and close. Initial Weekly Jobless Claims were lighter than expected (202K vs. est. of 215K). The more closely watched 4-week moving average tanked down to 211,750.

Production: The preliminary 4th QTR Non-Farm Productivity hit 1.4% vs. est. of 1.6%. Unit Labor Costs rose by 1.4% vs. est. of 1.4%. The report showed inflation-adjusted hourly compensation averaged a 1.9% pace in 2019, the biggest gain since 2015.

Trade War: China has announced that it will cut the tariffs that they impose on U.S. goods entering their market by 50% on 1,717 items.

Germany: Factory Orders -2.1% vs. est. of 0.6%

TODAY’S POTENTIAL RATE VOLATILITY: MODERATE

Rates are moving sideways so far today with a slight bias toward higher rates on low volatility. Look for the same today after concerns about the coronavirus seem to be receading.

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