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 lower today. The MBS market worsened by -73 bps last week. This was enough to increase mortgage rates or fees. The market experienced high volatility last week.

    This Week's Rate Forecast: HIGHER
    Three Things: Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Inflation, 2) The Fed and 3) Treasury Sales.

    1) Inflation: Other than the Fed's key measure of inflation (Core PCE), we get the two most important inflationary gauges this week with Consumer Price Index and Producer Price Index. Both are expected to remain at very elevated levels with markets split on if they will truly show a peak or moderation in the pace of acceleration. Just how strong or weak these data sets are will have a major impact rates.

    2) The Fed: We get a lot of Fed speak this week with the bond market focusing on getting more of a consensus out of the Fed on what they consider a "neutral" rate, and the scale and timing of their rate hike path.

    • 05/09 Raphael Bostic
    • 05/10 John Williams, Raphael Bostic, Neek Kashkari, Loretta Mester
    • 05/11 Atlanta Fed Business Inflation Expectations
    • 05/12 Mary Daly, Fed Balance Sheet
    • 05/13 Nell Kashkari

    3) Treasury Sales: We have 3s, 10's and our 30 this week. We really haven't seen any meaningful impact after the last several 10 year note auctions but we have seen some volatility after the last couple of 20 year bond and 30 year bond Treasury auctions.

    • 05/10 3 year note
    • 05/11 10 year note
    • 05/12 30 year bond

    This Week's Potential Volatility: HIGH
    This morning markets are under pressure. Volatility has started high as traders try and predict this jam packed week.

    Bottom Line:
    This morning markets are regaining some of the ground lost last week. Volatility has been high to start and will likely stay high through the week.

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