Three Things That Can Move Rates This Holiday Week

THIS WEEK’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 trending sideways this morning.  Last week the MBS market worsened by -17 bps.  This caused rates to move very slightly higher for the week.

THIS WEEK’S RATE FORECAST: NEUTRAL

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Christmas, 2) Trade and 3) Domestic

1) Christmas: Merry Christmas! Since Friday afternoon, bond traders have been heading out for the holiday season. Look for very “thin” volumes all week. The bond market will close early on Tuesday and then reopen on Thursday.

2) Trade Wars: China has announced a series of tariff cuts on basically everything that they are needing (pork, cell phone parts, etc.) and are spinning it as a trade concession. There are no scheduled nor expected official announcements on trade as the two sides try to make it to an early January signing.

3) Domestic: There are no significant economic releases that are likely to impact rates.

Treasury Dump: Treasury Auctions this week.

• 12/23 2 year note
• 12/24 5 year note
• 12/26 7 year note

THIS WEEK’S POTENTIAL VOLATILITY: LOWER

With the holiday and shortened trading week, rates are likely to move sideways on low volatility. It will take something unforeseen on the trade war to move rates out of the existing channel.

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