New home sales pullback from a 10-year high

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Published Date 5/23/2017

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 to slightly lower so far today. The MBS market worsened by -7bps yesterday. This probably wasn't enough to worsen mortgage rates or fees. The market experienced moderate volatility yesterday.

Today's Rate Forecast: Neutral

Housing: New Homes Sales for April were lighter than expected (569K vs est of 621K), but March was revised upward from 621K to 642K.

Manufacturing: The Richmond Fed Manufacturing Index for May was much weaker than expected (1 vs est of 15).

The Preliminary May Markit flash manufacturing PMI hit 52.5 vs est 53.0 and the Services PMI hit 54.0 vs est of 53.1. Both are very healthy readings.

President Trump: While he continues his Middle East tour (Israel today), the details of his administration's budget proposal were released. It proposes to cut $3.6 Trillion over 10 years and to sell about half of our U.S. strategic oil reserves.

Fed: Fed Governor Lael Brainard discussed full employment and labor slack and said the Fed is still questioning if we are at full employment or do we still have a little room to run.

Neel Kashkari and Patrick Harker will speak this afternoon.

Treasury Auction: Today, we kick off three straight days of dumping our debt into the marketplace with our short term 2-year note.

Germany: Business confidence jumped to a high not seen since 1991. Their 1st QTR GDP matched market expectations of 1.7%.

Japan: Their Nikkei Manufacturing PMI for May (p) hit 52.0 (anything above 50.0 is good).

Eurozone: The May Markit Manufacturing PMI hit 57.0 vs est of 56.5 and their Services PMI hit 56.2 vs est of 5.4.

Today's Potential Rate Volatility: Average

While there's very little in the way of economic numbers due out that can move mortgage rates, there is significant political and geopolitical activity. That being the case, we still expect mortgage rates to continue to trend sideways as it has over the last few days with moderate 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

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