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 +9 bps yesterday. This caused rates or fees to mostly move sideways for the day. Even though we’ve seen consistent improvement in the MBS market this week, we do not see it reflected in mortgage rates. The rates experienced moderate volatility yesterday.
TODAY’S RATE FORECAST: NEUTRAL
Jobs: Initial Weekly Jobless Claims saw another surge, this time by 6.606M vs. est. of 5.250M. The 4-week moving average is now 4.265M.
Inflation: The March Producer Price Index (PPI) YOY headline number rose by 0.7% vs. est. of 0.5%. The Core PPI YOY rose by 1.4% vs. es.t of 1.2%.
Sentiment: The April Preliminary Consumer Sentiment Index hit 72.0 vs. est 75, which is very low.
Central Bank: In a historic move, the Bank of England announced this morning that it would begin to finance the short-term needs of the Treasury. In other words, it will directly monetize the UK deficit, something central banks had – for the past decade – denied they do or would do. The BOE move will allow the government to bypass the bond market entirely until the COVID-19 pandemic subsides, financing unexpected costs such as the job retention scheme where bills will fall due at the end of April.
The Fed: The Federal Reserve Bank of New York will ramp up purchases today and increase from $5.5B of FNMA 2.50, and 3.0 coupons at 9:50 am ET to $8.525B and then again at 2:20 pm ET.
The Federal Reserve announced another round of emergency measures. This time with a big hammer. They will do up to 2.3 Trillion dollars. Here is some of that that entails:
- The Main Street Lending Program will “ensure credit flows to small and mid-sized businesses with the purchase of up to $600 billion in loans.” This means that the Paycheck Protection Program will likely be expanded by an additional $250BN to reach a total of $600BN.
- A special-purpose vehicle that the Fed created jointly with the Treasury Department will purchase 95% of the loan while the financing institution would hold the other 5%.
- Expanding the size and scope of the Primary and Secondary Market Corporate Credit Facilities and the Term Asset-Backed Securities Loan Facility to support as much as $850 billion in credit.
- The loans would be geared toward businesses with up to 10,000 employees and less than $2.5 billion in revenues for 2019. Principal and interest payments will be deferred for a year.
- A Municipal Liquidity Facility which will offer as much as $500 billion in lending to states and municipalities, by directly purchasing that amount of short-term notes from states as well as large counties and cities.
- Starting the Paycheck Protection Program Liquidity Facility, “supplying liquidity to participating financial institutions through term financing backed by PPP loans to small businesses.”
Coronavirus: These are the headlines that the bond market is focusing on this morning.
- The US Cases now 433K, Deaths 15K.
- Global cases now 1.5M, Deaths 90K.
- Japan and Russia announce a surge in new cases.
TODAY’S POTENTIAL RATE VOLATILITY: AVERAGE
We’re likely to see MBS prices head higher today, going into the long weekend. Rate markets are helped by the concern over the increase in COVID-19 cases along with the Fed purchasing more mortgage-backed securities.
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
