Market Volatility Remains At Extreme Levels

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 +1 bps yesterday. This caused rates or fees to mostly move sideways for the day. The rates experienced extreme volatility yesterday.

TODAY’S RATE FORECAST: NEUTRAL

Treasury Dump: We kick off three days of dumping our debt into the marketplace with our shorter-term 3 year Treasury note.

Business Optimism: The NFIB Business Optimism Index for February improved to 104.5, which matched market expectations.

Stimulus: Treasury Secretary Mnuchin and National Economic Director Kudlow are meeting with Senate Republicans to see what can be passed in terms of stimulus spending and tax cuts.

Coronavirus: Here are the most recent headlines that the bond market is focusing on:

• China’s President Xi visited ground zero in Wuhan to declare that “victory is near” and that ” victory in Wuhan is a victory for Hubei, a victory in Hubei is a victory for China.”
• New Jersey joins the list of states that have declared a State of Emergency
• The United States has only completed 5 tests per Million People which makes the US the lowest tester among all countries
• Italy has gone on lockdown with travel restrictions for the entire country
• Ireland cancels all St. Patrick Day Parades
• The CDC has approved 78 public and private labs to test for coronavirus
• US cases rise to 755, Deaths at least 26
• Global cases rise to 114,578, deaths at least 4,028
• Harvard asked all students to NOT return from Spring Break and asked students to move out of their houses/dorms – all classes will be online.
• Japan unveiled a $4 Billion coronavirus package.

TODAY’S POTENTIAL RATE VOLATILITY: HIGH

Markets across the board continue to show extreme volatility. President Trump announced a potential tax cut that helped lift equity markets this morning and push rates slightly higher. With the high intraday volatility, it’s impossible to predict how everything will shake out at the end of trading today.

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