Week's market movers: EU, trade talks, and inflation numbers

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Published Date 6/25/2018

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 again this morning. Last week the MBS market improved by +4bps. This was not enough to move rates lower last week. There was very low mortgage rate volatility last week.

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) Trade wars and 3) Domestic.

1) Geopolitical. All eyes are on Europe. As Germany's Merkel is potentially on her way out and there's a big EU Summit in Brussels on Thursday and Friday. They'll discuss the latest trade war developments and Brexit, as well as migration policy, the EU budget, security and reforming the economic and monetary union.

2) Trade wars. Putting more pressure on China, the White House is said to be considering banning Chinese companies from investing in U.S. technology and would block even more technology-based exports to China. Also in the works is a tariff in European autos imported into the U.S.

3) Domestic: Inflation Nation - we get the Fed's "official" measure of inflation on Friday with the PCE report. We will also get the third release of the 1st QTR GDP, but that's old data at this point. Consumer confidence and consumer sentiment will get some mild attention. Chicago PMI on Friday will be very closely watched.

Treasury Auctions this Week:

06/26 2 year note
06/27 5 year note
06/28 7 year note

Fed this Week:

06/26 Raphael Bostic, Robert Kaplan
06/27 Eric Rosengren
06/28 James Bullard

This Week's Potential Volatility: Average

Mortgage rates moved sideways all week last week with very little volatility. We have a lot of economic data this week that can move rates. However, as of late, much of the focus has been on trade fears, and this could cause some market volatility.

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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