Three things that could impact rates this week

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Published Date 12/18/2023

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 this morning. The MBS market improved by +69 bps last week. This may have been enough to decrease mortgage rates or fees. The market experienced high volatility last week.

Today's Rate Forecast: Neutral

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

1) Inflation: We get the Fed's key measure of inflation, Core PCE on Friday. The bond market will be extremely sensitive to the MOM change.

2) Central Banks: We hear from the World's Number two and three economies' Central Banks this week with China and Japan. China has a track record of not doing too much at their meetings but has just recently injected a bunch of liquidity into their banking system. The Bank of Japan will get a lot of attention, while their relatively new Governor is not expected to raise rates at this meeting, the market is expecting some more definitive guidance on their rate path as they are still at -0.1% and they very well might be the only Central Bank hiking when everyone else is cutting.

3) Treasury Auction: We have a very important 20 year Treasury bond auction on Wednesday.

Today's Potential Rate Volatility: Neutral

This morning markets are under mild pressure due to Fed comments over the weekend. Volatility has started at moderate levels and will likely remain that was as markets prepare for the holidays.

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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