Fed Cuts Rates By Half A Percent Point

March 4, 2020

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: LOWER

Rates are moving lower so far today on very high volatility. The MBS market worsened by -2 bps yesterday. This caused rates or fees to mostly move slightly higher for the day on high volatility.

TODAY’S RATE FORECAST: LOWER

The Fed: We will hear from Loretta Mester and Charles Evans today.

Central Bank: The Reserve Bank of Australia lowered its key interest rate from 0.75% down to 0.5%, this was NOT expected. At the G7 meeting, the joint statement of solidarity showed that the leaders, who include the US, Britain, Canada, France, Germany, Italy, and Japan, are capable of a coordinated strategy. They vowed to use “all appropriate policy tools including fiscal measures where appropriate,” but stopped short of promising interest rate cuts or other immediate rescue measures.

The Federal Reserve cut its key interest rate by -50 BPS; it was a unanimous decision.

Coronavirus: Here are the latest headlines getting the attention of bond traders.

Two NYC Schools close on the suspected local case(s).
NY Gov Cuomo confirms 2nd case.
US case total tops 100 across 15 states (including evacuees).
6 deaths in the US, all in Washington State.
South Korea case total passes 5,000; death toll hits 34.
Iran confirmed cases pass 2,000, 70+ dead, 23 Members of Parliament confirmed to have it.
9 new cases confirmed in Japan

UK Prime Minister Boris Johnson said, “we are ready for potential economic downside,” as the UK faces a “national challenge” in defeating the virus.

CDC to stop disclosing the number of tests completed after last week, it was disclosed that under 500 cases in the entire US had been completed.

TODAY’S POTENTIAL RATE VOLATILITY: HIGH

Rate volatility is once again at very high levels. The Fed lower rates by 50 bp this morning, which helped to push rates lower on very high volatility. The coronavirus and the Central Banks around the world are the primary focus of rate markets right now, and this will likely be the case throughout the week.

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