Three things that could impact rates this week

Published Date 4/8/2024

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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 under pressure today. The MBS market worsened by -34 bps last week. This may have been 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) Inflation, 2) Central Banks and 3) The Fed.

1) Inflation: We have three big reports this week that address inflation: CPI, PPI and Import Prices. It was a month ago that higher than expected readings in both CPI and PPI kicked off a round of worsening MBS prices. They are expected to continue to expand.

2) Central Banks: We will have important rate decisions and policy statements and speeches from several central banks this week with the spotlight on Thursday's ECB. The European Central Bank had been considered (two meetings ago) to be on a path towards being the first Central Bank to start cutting rates right about now... however that expectation has soured and we will be looking for more forward guidance out of the ECB.

3) The Fed: One of the main sources of downward momentum in the MBS markets over the past two weeks has been various Fed Speeches that seem to support being "data dependent" and sticking to the 2% target rate and that the Fed's rate landscape may only include 1 rate change this year instead of the 3 that are still priced in. This week we will also focus on Fed Speak and will get the Minutes from the last FOMC meeting.

Treasury Auction: Thursday's 30Y Bond Auction will be the most important of the week.

04/09 3 year note.

04/10 10 year note.

04/11 30 year bond.

This week's Potential Rate Volatility: High

This morning markets continue to be under pressure after last week's data. Volatility has started high as markets adjust to a new trading 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

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