Market Commentary

For the week of June 24, 2019

THREE THINGS RATE MARKETS WILL BE WATCHING FOR THIS WEEK

 

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 so far today. Last week the MBS market improved by +27bps.  This was enough to move rates lower last week. We saw a good deal of rate volatility throughout the week.

THIS WEEK'S RATE FORECAST: NEUTRAL

Three Things: These are the three areas that have the biggest ability to impact mortgage rates this week. 1) Trade War, 2) Geopolitical and 3) The Fed

1) Trade War: The G-20 Summit in Osaka, Japan, will start on Friday and continue through the weekend. Leading up to that event, confirmation of scheduled meetings (number and length) between Trump and Xi as well as information about precisely what will and will not be discussed will have a significant impact on markets.

2) The Fed: We have a big week for speeches, including one from Fed Chair Jerome Powell. This is the Fed's chance to steer the markets if they feel that market sentiment about the Fed's path after last week's FOMC inaction is misguided. Here is the schedule:

  • 06/24 Dallas Fed Mfg, Chicago Fed Mfg
  • 06/25 Powell, Bostic, Williams and Bollard (the lone NO vote last week)
  • 06/27 Fed's Balance Sheet

3) Geopolitical: There is a lot for markets to focus on this week. Iran-U.S. is heating up as President Trump says that even more sanctions are set to go into effect today. The Eurozone is still a basket of instability as the EU and Italy fighting over a budget and Brexit continues to be the soap opera that keeps on giving with wild news/tabloid stories on PM front-runner Borris.

Treasury Auctions this Week:

  • 06/25 2 year note
  • 06/26 5 year note
  • 06/27 7 year note

THIS WEEK'S POTENTIAL VOLATILITY: HIGH

We have several economic reports due out this week, but much of the focus will be on the trade war updates, Fed speeches, and Iran-US tensions. Rates will likely remain at elevated levels this week short of a resolution to any of the current issues, which is unlikely.

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