Insights and Analysis: Mortgage and Real Estate Capital Markets Update with Jeff Rosato, SVP of Capital Markets at Nationwide Mortgage Bankers.
Key Takeaways: Bond Market Trends and Fed Outlook
Mortgage rates have gone up for the fifth week, reaching the highest levels since August, due to uncertainty around the upcoming U.S. election and a Federal Reserve meeting on interest rates. If the election results are clear and the Fed lowers rates as expected, experts think the recent market volatility may settle down.
Here is this week’s update on the major bond market indices, scheduled Federal Reserve meetings, upcoming market-moving economic data releases, and general bond market trends.
“There is not much market-moving data being released this week, but markets could be extremely volatile with the U.S. elections pending and the FOMC decision on Thursday.”
Lock Volume and Mortgage Rates
Last week was a below-average week for new lock volume. We had 68 new locks for $33M, averaging just 14 locks per day. Our trailing 4-week daily lock average has ticked down to 16 per day. The Freddie Mac average 30-year fixed rate was 6.72% as of last Thursday, up another 10 basis points from the prior week. That puts the max APR this week for 30-year fixed-rate loans at roughly 8.22% (6.72 + 1.50). The 10-year Treasury yield closed last week at 4.36%, up sharply by 12 basis points on the week.
Mortgage rates increased for the fifth consecutive week, reaching their highest levels since early August. Uncertainty around the presidential election and the FOMC rate decision this week has created volatility in bond markets over the past few weeks. Fresh inflation and employment data released last week further contributed to this volatility. The PCE Index (inflation) released on Thursday met expectations, while the October employment report on Friday showed only 12,000 jobs created, significantly below the expected 110,000. Previously reported job gains in September and August were also revised downward, reaffirming that job growth has slowed. Despite cooling job numbers, the U.S. economy continues to grow, with Q3 GDP showing a 2.8% annualized increase.
This Week’s Economic Calendar
Economic data has been mixed, leading to uncertainty over a rate cut from the Fed in November. However, recent employment data weakness and receding inflationary pressures suggest the Fed may reduce the Fed Funds rate by 25 basis points on Thursday. It’s also anticipated they will continue rate cuts gradually in the coming months. While there is little market-moving data being released this week, markets could be highly volatile with the pending U.S. elections and FOMC decision. Markets favor certainty, and if election results are clear and the Fed cuts rates by 0.25 on Thursday as expected, volatility should ease, and calmness could return.
As of today, MBS prices are better by about 15-25 basis points compared to Friday’s close, and the 10-year Treasury is also rallying, down about 7 basis points to 4.29%. The bond markets will be closed next Monday for Veterans Day, and accordingly, the NMB lock desk will be closed for new locks and relocks.
We’ll keep an eye on the market for any updates—check back next week for the newest insights!
