Mortgage Rates Sideways thus Far
Mortgage rates started to trend a little higher this
morning, but has since subsided to little movement whatsoever. After last week movement in rates, we now
have one of the busiest weeks we have had for a while. Key economic data, the
FOMC, Janet Yellen’s press conference, the Fed releases is quarterly updates on
GDP, inflation, the Bank of England and Bank of Japan meetings, and possibly
the UK invoking article 50 of the EU charter to start the process of exiting (a
two-year process).
The much-anticipated March FOMC meeting will conclude
Wednesday at 1:00PM. The Fed has done everything that it could over the past
month to move the markets to expect a rate hike. If they do raise rates a 1/4
point, there is still a lot that they can do to impact mortgage rates. First,
this meeting we get their economic projections which contain the famous
"dot plot chart". This chart showed at least 3 rate hikes in 2017 the
last time it was released but it took until last week for the market to finally
believe them. Will this new dot plot chart show 4 hikes? Will it show more in
2018?
Also, we get a live press conference with Fed Chair
Janet Yellen and her responses to live questions can really move pricing. MBS
will also be EXTREMELY sensitive to any discussion or mention of the FOMC considering
or considering a time line to slow the rate of MBS purchases.
Overseas, there are other issues that can impact the
demand on our MBSs. The EU is rumbling;
the elections in France, Netherlands pushing to also exit; only a matter of
time now before the current structure of the EU will undergo a major
realignment splitting in two with stronger economies and weaker ones corralled
into their own sectors.
The day after the FOMC meeting, we get the Bank of
Japan's Central Bank rate decision and policy statement. They currently have a
negative rate (-0.10), will they move that back to at least zero? A few of
their members have already suggested slowing the pace of (tapering) their QE.
We also get very key economic releases out of China (Retail Sales, Industrial
Production), Germany (CPI) Eurozone (CPI, Unemployment), and Great Britain will
have their Central Bank interest rate and policy statement as well.
Likewise, here in the US, we have a very large plate
of heady economic data to absorb this week with Retail Sales, Inflation (PPI
and CPI), Manufacturing data (Empire, Philly Fed, Industrial Production) and
Consumer Confidence.
Oil will continue to be closely watched as the slide
below $50 has actually helped mortgage rates, meaning MBS would have sold off
even more if it were not for falling WTI Oil prices last week.
Mortgage rates have a high probability of being very
volatile this week with all the big events denoted above. While the market has a rate increase already
priced in, we could see significant mortgage rate volatility tied to Janet
Yellen's comments on Wednesday.
New York and New England are expecting a hit later today and tomorrow with a possible 18" of snow and 50MPH winds. If it hits NY City traders will be absent and market volatility will remain subdued with a few willing to step into a void.
Comments
Post a Comment