Three things that can move mortgage rates this week

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Published Date 3/12/2018

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 -7bps. This probably moved mortgage rates sideways for the week. Mortgage rate volatility could be relatively high this week with all of the economic data being released.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week. 1) Geopolitical, 2) Inflation, 3) Across the Pond

1) Geopolitical: On one side, we have easing tensions between the U.S. and North Korea. While this is important for many reasons, on the MBS side there has been a solid "fear factor put" in long bonds which have been supportive of pricing. So, IF (and that is a big IF) the bond market buys into the headlines that there will be a peace accord, MBS could lose some of that premium. On the tariff side, Japan and the EU have officially requested that they be exempted from the new tariffs.

2) Inflation: We get both consumer prices and producer prices this week. Tuesday's CPI will carry the most weight. While the headline YOY CPI has been over 2%, the market will be watching for when the Core (ex-food and energy) will crack the 2% level, it has been stuck at 1.8%.

3) Across the Pond: A lot going on this week: China: Continued "trade war" discussions and retail sales data. Japan: BofJ minutes, Industrial Production. Eurozone: Finance Ministers Meeting, unemployment change, CPI, and we hear from ECB head Draghi.

Treasury Dump: Quick - dump our debt while we can still finance it at low rates. That's exactly what the Treasury is trying to do with rates steadily rising.

03/12 3 year note and 10-year note
03/13 30 year bond

This Week's Potential Volatility: High

Mortgage rate volatility this week could be a bit higher than normal with the influx of economic data. The jobs and inflation data are the most significant data points the markets will receive.

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.

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