Three Things That Can Move Rates This Week

January 21, 2020

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 on low volatility this morning. Last week the MBS market lost -5 bps. This caused rates to move sideways on low volatility.

THIS WEEK’S RATE FORECAST: NEUTRAL

Three Things: These are the three areas that have the greatest ability to move rates this week. 1) Central Banks, 2) Geopolitical, and 3) Davos.

1) Central Banks: We will get key interest rate decisions and policy statements from the world’s largest economies this week:

01/21 People’s Bank of China
01/22 Bank of Japan
01/23 Bank of Canada
01/24 European Central Bank

2) Geopolitical: There are a lot of big stories that will grab the attention of bond traders. In the US, it’s the Senate Impeachment process. In Europe, we have the Brexit deadline in only 10 days. Of course, in China, we have a zombie-plague (Coronavirus) outbreak, and there is plenty of uncertainty to go around with Iran, Iraq, and Syria.

3) Davos: The World Economic Forum has kicked off in Davos, Sweden, and we will hear from major leaders, bankers, central bankers, and economists.

THIS WEEK’S POTENTIAL VOLATILITY: LOW

We have a shortened week this week and a light week for economic releases. However, we do have a lot of political and geopolitical activity that can move rates this week. We’ll also be looking at Central Bank action from around the globe.

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