Three things that can move rates this week

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Published Date 5/17/2021

This Week'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 trending sideways this morning. Last week the MBS market worsened by -66bps. This was enough to move rates or fees higher last week. We saw elevated rate volatility through the week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to move rates this week. 1) The Fed, 2) Geopolitical, and 3) Domestic

1) The Fed: We get the Minutes from the last FOMC meeting on Wednesday. The bond market will be very sensitive to any mention/discussion of tapering. We will hear from a few key figures of the Fed to see if they lighten up on their non-stop message that keeps building the case for inflation is only "transitory."

2) Geopolitical: Across the Pond, the markets will continue to pay close attention to Israel/Palestine as the potential for escalation and spillover could disrupt much of the region and beyond. Covid in Asia is a big concern. Reopening in Great Britain is underway while the EU is dysfunctional and a cause for concern with vaccine rollouts. Domestically, Biden's infrastructure plan looks to be paired down but making slow progress while his other additional $2T plan is in the spotlight. On the Jobs front, more states have joined in to stop the Federal unemployment stipend, but 39 million households are set to get $250 to $300 per child per month.

3) Domestic: We get a lot of housing-related news this week, but the focus will be on Manufacturing (Empire, Philly Fed, and Flash PMIs) as well as Jobless Claims.

Treasury Dump: Here is this week's schedule.

05/19 20Y Treasury Bond Auction

This Week's Potential Volatility: High

We expect rate market volatility to remain elevated this week, given all of the events denoted above. Rate markets will pay particularly close attention to the Fed and domestic data.

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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