Market Focus: Coronavirus, Stimulus, And Retail Sales

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 improved by +102 bps yesterday. Typically this would be a fantastic move for rates, but in these times, mortgage rates may have slightly improved. Rates, once again, experienced high volatility yesterday.

TODAY’S RATE FORECAST: NEUTRAL

Retail Sales: The March headline retail sales data was softer than expected (-0.5% vs. est. of +0.2%). However, some of that miss was due to the substantial upward revision to February from 0.3% to 0.6%. Ex-Autos, Retail Sales were down -0.4% vs. est. of +0.2%.

Manufacturing: February Industrial Production was stronger than expected (0.6% vs. est. of 0.4%). Capacity Utilization was in line with estimates (77.0% vs. est. of 77.1%)

Housing: The March NAHB Housing Market Index remained above 70 with a reading of 72

Jobs: The January Job Openings and Labor Turn Over Survey (JOLTS) showed a nice improvement, moving from 6.552M unfilled jobs in December to 6.963M in Jan.

Stimulus: The White House and Senate are working on the final touches for an $850B package. This would include payroll tax suspension for the rest of the year, the bailout of Airlines, and potentially “helicopter money” for consumers.

Japan: Industrial Production 1.0% vs est of 0.8%

Great Britain: Unemployment Rate 3.9% vs. est. of 3.8%

Coronavirus: These are the headlines that are getting the attention of bond traders this morning:

• The Kentucky Derby is postponed until September
• MLB has delayed the open of their season
• The famed Las Vegas Strip will close for the first time ever
• U.S. Cases 4,661, Deaths 85
• Nordstrom to close all stores in the US
• McDonald’s closes all in-restaurant dining
• Spain’s cases surge to 11,178 up 2K from Monday
• France does a $50B stimulus bill as French President Macron says, “we are at war.”
• California Gov. Gavin Newsom ordered all bars, restaurants, and wineries in the state closed
• 7 California Counties on Lock Down (Quarantine)
• CDC and President Trump announced that all groups of 10 or more should be avoided at all costs.
• The CDC confirmed that one of its employees had tested positive for the virus. The WHO reported that two of its staffers had tested positive.
• Spain and Italy ban short-selling
• Amazon to hire 100K delivery/warehouse employees

TODAY’S POTENTIAL RATE VOLATILITY: HIGH

Rate volatility will likely be extreme once again today. The big factor that could move rates is if the Senate announces a meaningful bailout agreement. If they do, and it looks like it has the potential to do some good, look for rates push higher.

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