In this week’s mortgage rate summary, we’ll explore the changes (or lack thereof) to expect in rate movement.
Rates Currently Trending: Neutral
According to our sources at Sigma Research, mortgage rates are currently trending neutral, with mortgage backed securities (MBS) losing -20 basis points (BPS) from last Friday’s close which caused fixed rates to move slightly higher from the previous week. Tuesday brought the lowest rates while Friday’s rates were the highest.
This Week’s Rate Forecast: Neutral
Central Banks: Obviously, all eyes will be on our Federal Reserve but we also have Central Bank rate decisions and policy announcements from the Bank of England (5th largest economy) and Bank of Japan (3rd largest economy).
Our Federal Open Market Committee (FOMC) will begin meeting on Tuesday and will conclude Wednesday at 2:00 PM EDT. The following is the schedule:
- 2:00 PM EDT – Release of their Interest Rate Decision and Policy Statement
- 2:00 PM EDT – Release of their Economic Projections and Dot Plot Chart
- 2:30 PM EDT – Fed President Janet Yellen live press conference.
While most bond traders publicly say that they expect a 25 BPS rate hike at this meeting, it doesn’t seem to be fully priced in. That is mostly because long bond traders have significantly walked back their expectations for a 3rd hike this year. Their forward guidance (dot plot chart) and Yellen’s live comments will have more of an impact on our MBS pricing than a rate increase by itself.
Treasury Auctions this Week:
- 06/12 10-year note
- 06/13 – 30-year note
Domestic: We have a huge week for economic data with the focus on inflationary data (PPI and CPI) and Retail Sales.
Geopolitical: We still have a lot of uncertainty in Great Britain as their new government attempts to gain some sort of majority and direction. Qatar and the Saudis appear deadlocked into more conflict, and at home we have more Senate testimony (Attorney General Sessions to testify) and the state of Maryland has filed a lawsuit against Trump.
This Week’s Potential Volatility: Average
The days starts with our FNMA coupon rollover. We are expecting Monday to trade in the +12 to -12 BPS range (net of the rollover). For the week, we anticipate MBS to end the week at a slightly lower level than Monday’s open (higher rates). In order for rates to move lower, the following events would need to take place: The Fed does not increase the Federal Funds rate on Wednesday OR they signal that there will be no more rate hikes this year, along with comments from Yellen indicating a low likelihood of additional rate hikes this year.
The greatest likelihood is that we will see MBS continue to drift slightly lower (higher rates). Although MBS are under pressure, geopolitical fear provides a “floor” for MBS.
What’s the Bottom Line?
When comparing the risks and benefits of locking in your interest rate today or floating your loan rate, be sure to enlist the help of your mortgage professional. If you’re searching for home financing in the state of Texas, please don’t hesitate to contact us for a free, no-obligation mortgage rate quote.
Comments are closed.