Market Focus: Coronavirus, Stimulus, And Retail Sales

March 17, 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: NEUTRAL

Mortgage rates are moving sideways so far today. The MBS market improved by +102 bps yesterday. Typically this would be a fantastic move for rates, but in these times, mortgage rates may have slightly improved. Rates, once again, experienced high volatility yesterday.

TODAY’S RATE FORECAST: NEUTRAL

Retail Sales: The March headline retail sales data was softer than expected (-0.5% vs. est. of +0.2%). However, some of that miss was due to the substantial upward revision to February from 0.3% to 0.6%. Ex-Autos, Retail Sales were down -0.4% vs. est. of +0.2%.

Manufacturing: February Industrial Production was stronger than expected (0.6% vs. est. of 0.4%). Capacity Utilization was in line with estimates (77.0% vs. est. of 77.1%)

Housing: The March NAHB Housing Market Index remained above 70 with a reading of 72

Jobs: The January Job Openings and Labor Turn Over Survey (JOLTS) showed a nice improvement, moving from 6.552M unfilled jobs in December to 6.963M in Jan.

Stimulus: The White House and Senate are working on the final touches for an $850B package. This would include payroll tax suspension for the rest of the year, the bailout of Airlines, and potentially “helicopter money” for consumers.

Japan: Industrial Production 1.0% vs est of 0.8%

Great Britain: Unemployment Rate 3.9% vs. est. of 3.8%

Coronavirus: These are the headlines that are getting the attention of bond traders this morning:

The Kentucky Derby is postponed until September
MLB has delayed the open of their season
The famed Las Vegas Strip will close for the first time ever
U.S. Cases 4,661, Deaths 85
Nordstrom to close all stores in the US
McDonald’s closes all in-restaurant dining
Spain’s cases surge to 11,178 up 2K from Monday
France does a $50B stimulus bill as French President Macron says, “we are at war.”
California Gov. Gavin Newsom ordered all bars, restaurants, and wineries in the state closed
7 California Counties on Lock Down (Quarantine)
CDC and President Trump announced that all groups of 10 or more should be avoided at all costs.
The CDC confirmed that one of its employees had tested positive for the virus. The WHO reported that two of its staffers had tested positive.
Spain and Italy ban short-selling
Amazon to hire 100K delivery/warehouse employees

TODAY’S POTENTIAL RATE VOLATILITY: HIGH

Rate volatility will likely be extreme once again today. The big factor that could move rates is if the Senate announces a meaningful bailout agreement. If they do, and it looks like it has the potential to do some good, look for rates push higher.

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