Insights and Analysis: Mortgage and Real Estate Capital Markets Update with Jeff Rosato, SVP of Capital Markets at Nationwide Mortgage Bankers
I hope everyone enjoyed the weekend! Here is this week’s update on the major bond market indices, economic data releases, and general bond market trends.
Bond Market Indices
Here’s a glimpse of key bond market indices as of May 1, 2024:
Market Analysis:
Rates remained on the rise last week and as a result lock volume was down from recent weeks. We had a total of 61 locks for $24M. So far overall April locked volume is down just slightly by 7% compared to the same time in March, and our trailing 4 week daily lock average is 16 locks. The Freddie Mac average 30 year fixed rate is at 7.10% as of last Thursday, up sharply by 22 basis points from 6.88% the prior week. This is the first time this year that the Freddie average rate came in above 7%. That puts the max APR this week for 30 year fixed rate loans at roughly 8.60% (7.10 + 1.50). The 10 year Treasury yield closed last week at 4.62%, and is basically flat at 4.61% today but still at the highest levels since November. reflecting stronger than expected economic data.
“The rally late last week came after Fed Chair Powell denied that the Fed is considering rate hikes and insisted the FOMC is comfortable rates are high enough to put inflation back on a downward track along with weaker than expected employment data.”
Market Trends and Analysis
Last week we finally saw a relief rally for mortgage rates as the Fed held benchmark rates steady. With rates on the decrease, we had a good week in terms of lock volume. We had a total of 93 locks for $44M, capped off on Friday with 36 locks! That’s the most locks in a single day that we’ve had in months. Overall, April locked volume was 381 units for $162M which was a 13% increase compared to March, and our trailing 4-week daily lock average has ticked up to 18. The Freddie Mac average 30-year fixed rate is at 7.22% as of last Thursday, up by 5 basis points from 7.17% the prior week, but that number does not include the impressive rally that we had on Thursday and Friday. That puts the max APR this week for 30-year fixed rate loans at roughly 8.72% (7.22 + 1.50). The 10-year Treasury yield closed last week at 4.50% and is down just slightly to 4.49% today.
The rally late last week came after Fed Chair Powell denied that the Fed is considering rate hikes and insisted the FOMC is comfortable rates are high enough to put inflation back on a downward track along with weaker than expected employment data. In recent weeks market participants have pushed hopes of rate cuts back to July or September after a string of better-than-expected economic data and persistent inflation, and there were some fears that the Fed could still hike rates this year. The futures markets have drastically pared back bets on the amount of rate cuts that will be made in 2024 to a total of 50 basis points of cuts, which is down sharply from 150 basis points at the beginning of the year. Recent commentary from the Fed suggests that they are in no hurry to cut rates and that rates may stay higher for longer.
Also fueling the rally on Friday was the April nonfarm payrolls report that came in below market expectations. Jobs grew by 175k in April which was well below the expectation of 243k, and the unemployment rate ticked up slightly to 3.9% from 3.8%. The bond markets reacted very positively to the report after about four consecutive weeks of increasing rates.
Economic Indicators and Future Outlook
This week is very light on economic news although there are many Fed speaking engagements where we could see more elaboration on the FOMC’s strategy moving forward. Although this week has a break from major economic data, a fresh round of CPI and PPI data are on the horizon for next week. Today rates are generally flat compared to Friday’s close and the 10-year Treasury is down slightly by about 1 basis point at 4.49%.
Stay tuned for next week’s updates and insights in our next installment. Have a great week!
