Ryan's Rate Commentary

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. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: NEUTRAL
Mortgage rates are moving sideways today. The MBS market worsened by -32 bps last week. This may have been enough to increase mortgage rates or fees. The market experienced moderate volatility last week.

This Week's Rate Forecast: NEUTRAL
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Inflation, 2) Central Banks and 3) Report Card.

1) Inflation: The Fed's key measure of inflation, Core PCE will hit on Friday just days before the July FOMC Meeting. After trailing lower in the last MOM reading, it is expected to increase this time around. Regardless, a stronger (higher) reading will be negative for rates while a lower reading will be great for rates.

2) Central Banks: The People's Bank of China has already lowered their main interest rate by -10BPS this morning which was not expected but does follow a series of weaker than expected GDP data. We will also hear from the Bank of Canada which may also lower their rate.

3) Report Card: We get the preliminary, first look at the 2nd QTR GDP on Thursday, it is expected to come in at 2%.

Treasury Auction: We are dumping a massive amount of debt into the marketplace this week.

07/23 2 year note $69B
07/24 5 year note $70B
07/25 7 year note $44B

This Week's Potential Volatility: HIGH
This morning markets are moving within a narrow trading channel. Volatility has started low with no data on Monday but will increase to high later in the week.

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.