January 15th, 2021 12:04 PM by Richard Sardella MLO.100007700/NMLS 233568
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
Rates are moving slightly lower so far today. The MBS market worsened by -4 bps yesterday. This caused rates or fees to mostly move sideways for the day. The rates experienced moderate volatility yesterday.
Today's Rate Forecast: Neutral
Retail Sales: The Headline December Retail Sales were dismal, showing a MOM decline of -0.7% vs. est. of 0.0%, plus November was revised downward. Ex autos, it was down -1.4% vs. est. of -0.1%, November was revised lower as well.
Manufacturing: The regional NY Empire Manufacturing Index was in positive territory but almost half the market expectations (3.5 vs. est. of 6.0). December Industrial Production was much stronger than expected (1.6% vs. est. of 0.4%), and Capacity Utilization beat as well (74.5% vs. est. of 73.6%).
Inflation: The December Producer Price Index (PPI) showed only a small gain of 0.3% on a MOM basis and 0.8% on a YOY basis. Ex Food and Energy, it was flat at 0.1% on a MOM basis and 1.2% on a YOY basis.
Consumer Sentiment: January Preliminary UofM Consumer Sentiment Index was weaker than expected, 79.2 vs. est. of 80.0, but future inflation expectations picked up in the survey.
Stimulus: Last night, President-Elect Biden outlined his proposal for a $1.9T plan that would be followed up with an additional plan for larger infrastructure spending. The plan would issue an additional $1,400 to those that just received their $600 check, and it also raises the weekly unemployment benefits. $416B for a "vaccination" program, $350B to state and local governments and only $50B to small biz grants and loans.
Today's Potential Rate Volatility: Average
Rate markets are moving slightly lower on elevated volatility after the weaker than expected retail sales. The rate markets are also digesting the stimulus proposal released last night. So far, rate markets indicate that it will be tough to push through the stimulus plan in its current form.
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.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.