MANUFACTURING, FED, TRADE WAR, AND OTHER FACTORS HANG OVER RATES

Feb 25, 2019 11:26:08 AM

THIS WEEK'S MORTGAGE RATE SUMMARY

RATES CURRENTLY TRENDING: NEUTRAL

Sitting at my desk this Monday at 11:17am the DOW is up 186.35. Normally not a good sign for interest rates; however the markets are only taking it as a love tap from your wife when you say the wrong thing at dinner. Last week the MBS market improved by +10bps which is about 1/8 in points improvement for the same rate. We saw pretty low rate volatility throughout the week.

THIS WEEK'S RATE FORECAST: NEUTRAL

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week: Fed, Trade War, and Domestic.

1) Fed: Fed Chair Powell will give his semi-annual monetary report to the Senate and House this week. We also have a lot of Fed speeches this week. Bond traders will be looking for more discussion on the path of expected inflation and the timing of the balance sheet wind down.

02/26 - Jerome Powell - Senate
02/27 - Jerome Powell - House
02/28 - Richard Clarida, Raphael Bostic, Robert Kaplan, and Patrick Harper.

2) Trade War: President Trump has postponed the March 1st deadline that would have increased tariffs on $200B of Chinese imports from a rate of 10% to 25% citing "substantial progress" in trade negotiations and said that they are currently working on a summit in March where President's Trump and Xi would sign an agreement in Mar-a-Lago. North Korea is also front-and-center as President Trump heads to Vietnam for a summit with N.K. Kim Jong Un. Also, the United States is looking to hit the EU with auto tariffs with the EU vowing to retaliate.

3) Domestic: For a refreshing change of pace, we actually have some big-name reports that have the gravitas to move rates this week. The stronger these reports are, the worse it will be for mortgage rates, the worse that they are - the better it will be for rates. The "biggies" this week are the preliminary 4th QTR GDP, PCE, and ISM Manufacturing.

Treasury Auctions this Week:

02/25 - 2-year and 5-year note
02/26 - 7-year note

THIS WEEK'S POTENTIAL VOLATILITY: AVERAGE TO HIGH

We have a good number of economic reports due out this week that has the potential to move mortgage rates. Rates have been moving sideways for some time now. It would take something unexpected, like a complete breakdown in trade talks, to push rates lower. Look for rates to move sideways to higher on relatively modest 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 us today!

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