Mortgage rates are trending sideways to slightly higher recently. Last week the MBS market improved by +29bps. This was enough to move rates or fees slightly lower last week; however as I've been saying... negotiate your contracts in earnest and lock in that refinance!
THIS WEEK'S RATE FORECAST: NEUTRAL
I'm neutral with a hint of "I have no clue what is really going on right now"! There are so many external factors affecting mortgage rates.
The Three Things: These are the 3 main areas that have the greatest ability to impact mortgage rates this week. 1) Central Bank, 2) Trade and 3) Jobs.
1) Central Bank: Ah the Fed! We will get key interest rate decisions and policy statements from 2 of the top 5 economies this week starting with our own Federal Reserve on Wednesday and then the Bank of England on Thursday. Based upon the recent Beige Book, there would appear to be nothing out there that would cause the Fed to take action at this meeting. The markets will be very sensitive to the live press conference afterward.
2) Trade: The U.S./China Trade War will wake up once again take center stage as meetings resume in China Tuesday as US Trade Representative Lighthizer and Treasury Secretary Mnuchin will be in Beijing to continue with another round of trade talks. The latest suggestion was that both sides were working to reach a draft agreement for some time in May with talks next week covering “trade issues including intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, purchases, and enforcement”. Chinese Vice Premier Liu He is then expected to travel to the White House on May 8th.
3) Jobs: We get a ton of income and jobs related data all week culminating in Big Jobs Friday. The focus will be on the Average Hourly Earnings YOY which is projected to jump from 3.0% up to 3.4%. If that is the case, then we will see the week end on a down note for rates. But if it remains at 3.0% or below, then rates will remain solid.
THIS WEEK'S POTENTIAL VOLATILITY: HIGH
There's a lot of economic activity this week that can cause rates to move and increase volatility. Most of the likely movement is for slightly higher rates. The two things that could push rates lower and increase volatility is a dovish sounding Fed and a breakdown in China trade talks.
Source: TBWS
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