Three things that can impact rates this week

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Published Date 1/24/2022

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 today. The MBS market worsened by -5 bps last week. This was not enough to increase mortgage rates or fees. The market experienced high volatility last week.

This week's Rate Forecast: Higher

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

1) Central Banks: Wednesday is a very pivotal day as we get key interest rate decisions from the Bank of Canada and our own Federal Reserve. The bond market will be very focuses on the path of QE...will it end in February or March? QT...will they set the stage for balance sheet tightening after March? Rate hike(s)? Will they have a rate hike at this meeting or telegraph 3 or even 4 rate hikes for this year? The answers to these questions will have a dramatic impact on rates.

2) Inflation Nation: We get the Fed's preferred inflationary measure, PCE on Friday. Regardless of what the Fed does/says on Wednesday... the PCE report on Friday will cause bond traders to hedge towards more aggressive action from the Fed if the Core PCE comes in at 4.7% or above (estimates are for 4.8%).

3) GDP: We get the preliminary (will be revised several times) 4th QTR GDP data which is expected to be well above 5.0%. Bonds perform very poorly with GDP above 3.00%.

Treasury Sales: Here is this week's Treasury note auction schedule:

01/24 2 year note

01/25 5 year note

01/27 7 year note

This week's Potential Rate Volatility: High

This morning markets are staying in a holding pattern. Volatility is moderate as markets wait for Wednesday.

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

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.