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 trending sideways this morning. Last week the MBS market improved by +33 bps. This was enough to move rates lower last week. We saw a good deal of rate volatility at the end of the week.

    This Week's Rate Forecast: NEUTRAL
    Three Things: These are the three areas that can impact rates this week. 1) Trade War, 2) Central Bank, and 3) Services.

    1) Trade War:
    We start the week on a bit of high note as Commerce Secretary Wilbur Ross met with Chinese Premier Li Keqiang in Bangkok on Monday. Ross says that the two sides are "very far along" with a Phase 1 trade deal. Any further movement on a concrete date and place for the next physical summit meeting and/or official announcements of agreements on larger portions of the Phase I deal will hurt rates. Conversely, any breakdowns in talks could push rates lower.

    2) Central Bank:
    This week we get interest rate decisions from the Bank of England and the Reserve Bank of Australia

    3) Services:
    While the manufacturing sector in the U.S. and China has been weak, the services sector has been solid, with it accounting for almost 75% of our economic output. The ISM Services report is expected to show expansion, and at a pace, that is stronger than the last reading. We also get key services readings from China, Germany, and the EU.

    Treasury Dump: Here is this week's auction schedule

    • 11/05 3 year note
    • 11/06 10 year note
    • 11/07 30 year bond

    The Fed: Here is this week's speech schedule:

    • 11/04 Neel Kashkari, Mary Daly
    • 11/05 Robert Kaplan
    • 11/06 Charles Evans, John Williams, and Patrick Harker
    • 11/07 Raphael Bostic

    This Week's Potential Volatility: AVERAGE
    Last week we had the Fed rate cut, weak manufacturing, and trade pushing rates around. This week it is all about the trade deal. It looks like we're close to a phase 1 deal. However, if things breakdown again, we're likely to see rates dip lower on elevated 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 your mortgage professional to discuss it with them.

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