Jobless claims in line with expectations

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Published Date 3/15/2018

Today'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 moving sideways so far today. The MBS market improved by +1 bps yesterday. This wasn't enough to improve mortgage rates or fees. The rates experienced low volatility yesterday.

Today's Rate Forecast: Neutral

Jobs: Initial Weekly Jobless Claims matched expectations with a reading of 226K. The more closely watched 4-week moving average dropped to 221,500 which is at or near a 45 year low and is bullish for March's NFP data.

Housing: The March NAHB Index hit 70 vs est of 71. Still very strong considering any reading above 50 is positive. The takeaways in this report are that they can't find enough good lots to build on and are concerned about rising material and labor costs.

Oil: Import and Export Prices continue to rise. The YOY Import Prices are up 3.5% which matched expectations. Import Prices MOM were double the market expectations with a 0.4% increase. Export Prices YOY were lower than expected (3.3% vs est of 4.2%) but just off of Jan's pace of 3.4%.

Manufacturing: We received 2 regional reports this morning. The Empire (NY) Manufacturing Survey was stronger than expected (22.5 vs est of 15.0) which is a big beat. The Philly Fed hit 22.3 vs est of 23.0. Both readings were in positive territory.

Geopolitical: Dodd-Frank: A bipartisan bill which would relax restrictions placed on the financial industry during the credit-crisis has cleared the Senate with a vote of 67-31. This is a big story for mortgage rates. It relaxes stress testing requirements intended to show how banks would survive another financial crisis (which some argue are more than needed) and would put more capital that has been effectively "frozen" in the banking system back to work in the lending system. Also, it would change some classifications. For example, city municipal bonds would now be classified as "highly liquid" which puts them on par with Treasuries and MBS. We have been talking about the "stealth QE" for years on how our financial institutions have been forced to buy and hold a tremendous amount of MBS which has kept mortgage rates artificially low. Now, they could start to sell off their MBS (or at least not buy anymore or fewer) and instead buy up munis that pay a better yield. This is a DEMAND/SUPPLY issue for MBS looking down the road.

Treasury: We will the Net TIC flows at 4:00 am ET

Fed: We will get their Balance Sheet at 4:30.

Today's Potential Rate Volatility: Low

Mortgage rates have been incredibly stable so far this month with very little volatility. Look for the same today, unless something unexpected happens geopolitically.

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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