Rate Market Volatility Continues

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: Higher

Mortgage rates are moving higher so far today.  The MBS market worsened by -62 bps yesterday. This caused rates or fees to move higher for the day. The rate markets experienced extreme volatility yesterday.

Today’s Rate Forecast: Higher

Inflation: The February Headline Producer Price Index (PPI) YOY increased by 1.3% vs. est. of 1.8%. The Core PPI (ex-food and energy) YOY increased by 1.4% vs. est. of 1.7%.

Jobs: Initial Weekly Jobless Claims were lower than expected (211K vs. est. of 218K), the more closely watched 4-week moving average remained very low at 214K.

Treasury Dump: We have our 30 year Treasury Bond auction at 1:00 pm ET.

Central Bank: The European Central Bank (ECB) kept its main interest rate at 0.0% and its deposit rate at -0.5% but announced more liquidity (asset purchases) to its schedule.

Coronavirus: The following are the most recent headlines that are grabbing the attention of bond traders.

• President Trump announced that travel from Europe will be cut off. However, people from Europe may continue to enter our county, unchecked, until Friday at midnight.
• The NCAA has announced that fans/spectators are not allowed into the arenas for the NCAA Basketball tournaments.
• The NBA canceled a game last night and then went ahead and suspended ALL games until further notice.
• Actor Tom Hanks and his wife have confirmed that they contracted the virus while in Australia.
• Spain’s entire cabinet is being tested for the coronavirus.
• Seattle became the largest city in the US to close its schools over the virus.
• Late-night talk shows in NY have canceled live audiences.
• Two NY Bronx schools close after student tests positive.
• The CME will close on Friday and will not reopen its floor. Instead, only electronic trading will be allowed.

Today’s Potential Rate Volatility: High

Market and rate volatility continues to be unprecedented. We’re looking for the same today. Rates are headed higher at the moment, but that can change very quickly with news about the coronavirus, Fed moves, or stimulus announcements.

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