Markets will pay close attention to a packed economic calendar this week

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April 27, 2020
Timothy Chase
Mortgage News

Markets will pay close attention to a packed economic calendar this week

Published Date 4/27/2020

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 improved by +11bps. This caused rates or fees to remain essentially unchanged. We saw low rate volatility throughout the week.

This Week’s Rate Forecast: Neutral

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

1) Coronavirus: Of course, this once-in-a-hundred year global pandemic is driving all macro economies and will continue to do so. Here are some of the main headlines to start our trading week.

UK Prime Minister returns to work after COVID
Many states to partially reopen this week
2nd round of PPP funds are released this week
Global Cases at or near 3 million, deaths 208K
The US cases 966K, deaths at least 55K
CDC expands its official list of symptoms
White Houses’ Dr. Birx says some social distancing measures will likely remain in effect until the end of Summer.
Japan’s PM Abe says Japan will approve remdesivir as world’s first approved COVID treatment

2) Central Bank: The Bank of Japan was the first out of the gate this week. They kept their key interest rate at -0.1% but announced unlimited QE and Bond purchases. Our own Federal Reserve will have its FOMC Interest Rate and Policy meeting this Wednesday. The markets do not expect anything new out of the Federal Reserve as far as rates and policy as the Fed has not been waiting to enact any measure that they feel appropriate. The news this week is that once again, the Federal Reserve Bank of NY will purchase fewer and fewer 2.50 and 3.00 MBS as part of their “tapper.” We will also hear from the ECB with their policy meeting on Thursday.

3) Domestic: We have one of the most densely packed economic calendars that you will ever see with the Preliminary 1st QTR GDP, Chicago PMI, PCE, ISM Manufacturing, Consumer Confidence, and Initial Weekly Claims. And those are just the major reports; we have plenty of mid and lower-tier releases as well.

This Week’s Potential Volatility: Average

The rate markets have been very tame for the last couple of weeks. That could change this week with a slew of economic data due out throughout the week. While we show volatility remaining around average, that can quickly change if the economic data that is released comes in wildly different than expectations.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

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Timothy Chase

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