This Week Rate Markets Focusing On The Coronavirus, Fed, And Stimulus

  • March 23, 2020
This Week Rate Markets Focusing On The Coronavirus, Fed, And Stimulus



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.


Mortgage rates are moving lower so far today.  The MBS market improved by +11 bps last week. This caused rates or fees to mostly move sideways for the week. The rates experienced extreme volatility last week.


Three Things: These are the three areas that can impact rates this week. 1) Coronavirus, 2) The Fed, and 3) Stimulus

1) Coronavirus: This is, of course, driving the other two items. Here are the most recent headlines that are impacting long bond traders.

  • Over 1/3 of all US citizens now on some form of lockdown/stay at home order
  • US Senator Rand Paul joins two Congresswomen as testing positive.
  • National Guard troops sent to NY, CA and WA
  • US Cases now at least 35,224 and deaths 471
  • Spain sees a 26% jump in deaths overnight.
  • New Zealand shuts down the country.

2) The Fed: The Fed has been taking daily action for the past week. This week starts with a massive move as they essentially announced unlimited QE. They will start with $50 billion of agency MBS purchases (at least) every day this week. They are also purchasing $75B of Treasuries, but that has less of an impact on mortgage rates.

3) Stimulus: The Senate failed to pass anything over the weekend as there are very different opinions on how the stimulus should be applied to private companies and individuals. The stimulus started as about an $850B package a week ago, then was around $1.3T, and now could hit $2.0T. The Senate has scheduled another vote for noon on Monday.


The coronavirus is affecting every facet of the market, including the Fed’s actions and stimulus. Look for volatility this week to remain at extreme levels and almost entirely dictated by the above three items.


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

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