Mortgage markets remained highly volatile for the second straight week last week. Yet, over the course of 5 days, mortgage bonds ended the week relatively unchanged.
Conforming rates worsened Monday, Tuesday and Wednesday — rising as much as 3/8 percent as compared to the week prior — before settling lower through Thursday and Friday.
On the week overall, 30-year fixed rates worsened, 15-year fixed held steady, and 5-year ARMs improved.
And despite all the data released last week, it wasn’t the fundamentals that were causing rates to move. Instead, Wall Street was firmly focused on the Federal Reserve’s scheduled 2-day meeting this week; preoccupied with the likelihood of new Fed stimulus program.
The Fed’s meeting adjourns Wednesday and the group is widely expected to announce a new round of bond market support at that time. Uncertainty over how big that package will be, however, is what’s causing rates to jump.
Market estimates range from $250 billion to over $1 trillion and when Wall Street expectations shifts toward the lower end of that range, mortgage rates have been rising. When expectations shifts toward the upper range, mortgage rates have been falling.
This is why it’s all eyes on the Fed this week. Once the Fed adjourns, there’s no more “expectation” — there’s only Fed commitment.
Other than the Federal Reserve’s get-together, there isn’t much new data due for release. The week’s calendar looks like this:
- Monday : Personal Income and Spending reports
- Wednesday : FOMC adjourns from its 2-day meeting
- Thursday : Initial and continuing jobless claim data
- Friday : Pending Home Sales, Jobs Report, Unemployment Rate
It’s unlikely that data will swing mortgage rates until after the Fed’s Wednesday adjournment, but, once that happens, expect bond market attention to shift to the October jobs report set for 8:30 AM ET release Friday morning. If jobs data is strong, mortgage rates should rise.
All things considered, it’s dangerous to float a mortgage rate this week. If you’re not already locked, talk to your loan officer prior to Wednesday afternoon.
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