Market Commentary

For the week of July 15, 2019

RATE MARKETS COULD BE IN FOR A WILD RIDE THIS WEEK

 

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 so far today.  Last week the MBS market worsened by -20bps.  This was enough to worsen rates or fees.  Last week we saw a good deal of volatility and we are likely to see the same this week.

THIS WEEK'S RATE FORECAST: NEUTRAL

Three Things: These are the three areas that have the most significant ability to rates this week. 1) The Fed, 2) Across the Pond 3) Domestic

1) The Fed: We get our last barrage of Fed Speak before we enter the "blackout" period next week where Fed Officials keep quiet leading up to the Fed meeting. Obviously, Fed Chair Powell will get a lot of attention and so with the Beige Book which is prepared specifically to be used in July's Fed Meeting. Here is the complete schedule:

  • 07/15 John Williams
  • 07/16 Jerome Powell, Michelle Bowman, Raphael Bostic, Robert Kaplan, and Charles Evans
  • 07/17 Beige Book
  • 07/18 John Williams, Fed Balance Sheet
  • 07/19 Eric Rosengren and James Bullard

2) Across the Pond: We started the week with China recording its weakest GDP growth rate in almost 30 years. Their 2nd QTR GDP came in at 6.2%, which matched market expectations. But retail sales for June shot up 9.8% vs est of 8.3%. We also get key economic data from -Japan: Imports and Exports, CPI. Germany: PPI, Great Britain: Unemployment Rate, CPI and PPI, Eurozone: CPI, Canada: CPI.

3) Domestic: With the Fed being "data dependent" and the U.S. seeing some solid economic data the last two weeks, this week's data will get a lot of attention leading up to the Fed meeting. This week the most important reading is retail sales, followed by industrial production, consumer sentiment, business inventories, import prices, and the Philly Fed.

THIS WEEK'S POTENTIAL VOLATILITY: HIGHER

We're not expecting a lot of rate volatility today. However, for the week, we could see a good deal of volatility given the domestic economic data denoted above. Rate markets will be paying particularly close attention to the retail sales numbers. If we get a weak number, rates could tick lower. If we get a strong number, rates are likely to push higher.

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