Lack of inflation keeping rates in check

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Published Date 8/10/2017

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: Lower

Mortgage rates are moving slightly lower so far today. The MBS market improved by +6 bps yesterday. This wasn't enough to improve mortgage rates or fees. The market experienced moderate volatility yesterday.

This Week's Rate Forecast: Lower

Inflation: Not in this report. The July Producer Price Index showed a yearly gain of only 1.9% for the Headline number and 1.8% for the Core (ex-food and energy). The market was expecting readings of 2.1% for both. So this is a miss to the downside.

Jobs: Initial Weekly Jobless Claims hit 244K vs est of 240K. The more closely watched 4-week moving average fell from 242K to 241K. Another strong labor report.

Fed: Today we get the NY Fed President (and FOMC Board member) William Dudley at 10EST.

Treasury: The most important auction of the week with our 30Y bond at 1EST.

Great Britain: Their Industrial Production was much stronger than expected (0.5% vs est of 0.1%) but their Trade Balance was worse than expected (-12.772B vs est of -11B).

Canada: In a country that has seen some huge housing bubbles in isolated metro areas this year, their New Home Prices rose 0.2% vs est of 0.4%.

This Week's Potential Volatility: High

Overall, the data today is good for mortgage rates. Potential volatility remains high simply because of the North Korea tensions.

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

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.