Key events for the markets this week

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Published Date 7/2/2018

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 improved by +7bps. This was not enough to move rates lower last week. There was very little 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) Trade Wars, 2) Fed and 3) Jobs.

1) Trade Wars: The officially begin this week with Canada hitting the U.S. with tariffs on beef, soup, ketchup, and whiskey. These are specifically targeted towards states that can have a significant impact on the next round of elections in the U.S. but have a limited macroeconomic impact. However, on July 6th the big round of tit-for-tat tariffs between the U.S. and China start which each of them enacting $34B in Tariffs. Mexico is stepping in as well with tariffs on pork.

2) Fed: Thursday's release of the minutes from the last FOMC meeting where they raised rates will get a lot of attention from traders. But also, we start a new quarter which means the Federal Reserve will drop the amount of their purchases of MBS and Treasuries by another $10B. This is the third drop this year in their measured, stair-step pattern of reducing their balance sheet.

3) Jobs: We get our "Big Jobs Friday" this week, and the bond market will be paying very close attention to hourly wages which are expected to remain at a 2.7% pace on a YOY basis. Any movement higher than that will pressure mortgage rates.

This Week's Potential Volatility: Average

With the holiday, mortgage rates are likely to move sideways until at least Thursday when rates could see some increased 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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