After a push higher on Monday, stocks, bond yields, and mortgage rates are easing back a little on Tuesday. Market participants are still largely in a wait and see mode ahead of Wednesday’s key Consumer Price Index Report.
With inflation data remaining in the spotlight, that reading has the potential to send current mortgage rates one way or another. Read on for more details.
Market Outlook 2.12.18 from Total Mortgage on Vimeo.
Where are mortgage rates going?
Rates down a little today
It was a strong start to the week on Monday with all of the major stock indexes moving higher. With long-term Treasury yields being sold off, we saw yields rise to multi-year highs.
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Of particular importance to mortgage rates is the yield on the 10-year Treasury note, which moved as high as 2.89% on Monday. That’s a big rise from where it was at the start of the year at 2.46%.
Mortgage rates typically move in the same direction as the 10-year yield, and as we saw in the most recent Freddie Mac Primary Mortgage Market Survey, the average rate on a 30-year fixed rate mortgage has moved up thirty three basis points since the start of the year.
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The general consensus among market analysts is that bond yields and mortgage rates still have room left to run. How high they will rise in 2018 is an ongoing debate, but we have seen several calls for the 30-year fixed rate to hit 5% by the time 2019 rolls around.
That’s not something that will happen overnight, but we are still dealing with the threat of rising rates this week. Tomorrow, we will get the Consumer Price Index reading for January–a key inflation reading that financial market participants will certainly have their eye on.
We haven’t seen much uptick for CPI in recent months, but that only increases the potential for a big market reaction if we see some unexpected growth.
After all, one of the leading theories for last week’s stock market decline was the jump in average hourly earning in the monthly job report for January, signaling to investors that inflation was picking up.
So what would happen if CPI comes in higher? Well, it’s easy to imagine a similar scenario as last Monday with stocks falling and bond yields and mortgage rates surging.
It’s definitely a wait and see game, with no clear outcome readily visible. The CPI report will be released at 8:30am tomorrow morning and the market reaction, if there is one, will happen swiftly after the release.
Federal Reserve on track to raise rates in March
Cleveland Fed President Loretta Mester spoke this morning to the Chamber of Commerce in Dayton, Ohio, stating that she is not overly concerned about the U.S. stock market’s recent stumble. She said, “I expect the economy will work through this episode of market turbulence and I have not changed my outlook.”
That means that she’s still planning on raising the federal funds rate by about three-quarters of a point in 2018. Mester did throw in the caveat that she would have to readjust her outlook on monetary policy if the data starts to come in differently.
Overall, it still seems like the Fed is poised to raise the federal funds rate for the first time in 2018 at their March meeting next month.
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Rate/Float Recommendation
Lock now to avoid risk of rising rates
Mortgage rates have been steadily rising throughout 2018. There is the definite risk that they will rise tomorrow when we get some key inflation data. If you want to avoid the risk of rising mortgage rates, your best bet is to lock in a rate now.
In the current rate environment, opting to float could mean that you’ll get a higher mortgage rate down the road. If that’s something you can stomach, then by all means do it, but just understand there is a clear risk involved.
Find out how to get the best rate possible with our in-depth video series.
Today’s economic data:
NFIB Small Business Optimism Index
The NFIB Small Business Optimism Index hit a 106.9 in January. That’s an increase from the prior month’s reading of 104.9.
Fedspeak
- Loretta Mester at 8:30am
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Notable events this week:
Monday:
- Nothing
Tuesday:
- NFIB Small Business Optimism Index
- Fedspeak
Wednesday:
- Consumer Price Index
- Retail Sales
- Atlanta Fed Business Inflation Expectations
- Business Inventories
- EIA Petroleum Status Report
Thursday:
- Jobless Claims
- Philadelphia Fed Business Outlook Survey
- PPI-FD
- Empire State Mfg Survey
- Industrial Production
- Housing Market Index
Friday:
- Housing Starts
- Import and Export Prices
- Consumer Sentiment
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from Total Mortgage Blog http://ift.tt/2EEaQbi
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