Market Commentary

Decemeber 2, 2019

THIS WEEK: RATE MARKETS FOCUS ON TRADE, JOBS AND

MANUFACTURING NUMBERS

THIS WEEK'S MORTGAGE RATE SUMMARY

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.

RATES CURRENTLY TRENDING: NEUTRAL

Mortgage rates are trending sideways so far today.  Last week the MBS market improved by +10bps.  This caused rates to move sideways. We saw very low rate volatility all week.

THIS WEEK'S RATE FORECAST: NEUTRAL

Three Things: These are the three areas that have the greatest ability to move rates this week. 1. Trade War(s), 2. Jobs, and 3. Manufacturing and Services.

1) Trade War(s): The December 15th deadline is fast approaching for the newest round of Chinese Trade Tariffs. China is pushing for not only for those tariffs to be postponed or removed but also for existing tariffs to be removed as a condition of completing a Phase I trade deal. Meanwhile, President Trump has reactivated steel and aluminum tariffs against Brazil and Argentina due to the massive devaluation of their currencies.

2) Jobs: We get a ton of job and wage-related economic data this week with ADP Private Payrolls, Challenger Job Cuts, Initial Jobless Claims, Non-Farm Payrolls, Unemployment Rate, Participation Rate, Average Work Week and most importantly - Average Hourly Earnings. The market is expecting another reading of 3.0% on a YOY basis. Any reading hotter than that will be negative for rates.

3) Manufacturing and Services: We get key readings for both manufacturing (1/3) of our economy and services (2/3) of our economy with both Markit and ISM releases. Perhaps more importantly, we get the same data from China, Germany, and the Eurozone.

THIS WEEK'S POTENTIAL VOLATILITY: AVERAGE

We get a ton of economic numbers this week that can move rate markets. Having said that, rates are trapped in a very tight channel for weeks now. It will take some unexpected jobs or manufacturing numbers to push rates out of its channel.

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.

Source: TBWS