Last week was another good week for lock volume. We averaged 15 locks per day and had a total of 73 for $31M.  Our trailing four-week average is up to 17 per day, and March volume is up almost 50% compared to the same time in February.  Keep the locks coming in and let’s turn them into fundings! Mortgage rates dipped down slightly last week, but that was not reflected in the Freddie Mac Primary Mortgage Market Survey released on Thursday.  The survey included the sharp spike in rates from the previous Thursday and Friday. The average 30-year fixed rate is at 6.87% as of last Thursday, up 13 basis points from 6.74% the prior week.  That puts the max APR this week for 30-year fixed-rate loans at roughly 8.37% (6.87 + 1.50). The 10-year Treasury yield closed at 4.22% on Friday, down about 9 basis points for the week.

It is widely expected that the Federal Reserve will begin cutting its benchmark Fed Funds rate at some time this year.  However, strong headline employment data and hotter-than-expected inflation data have led financial markets to price in a less aggressive rate-cutting strategy by the Fed.  The Fed does not expect it will be appropriate to reduce the target range in the short term until it has gained “greater confidence” that inflation is moving sustainably toward its target 2% level.  As expected, they held the rate steady last week.  Currently, at least three rate cuts are priced into the market with the first one expected in June with about a 75% probability. Markets were pricing in as many as seven rate cuts this year as recently as January, so there has been a big shift as market expectations have come back in line with the Fed.

This week Fed officials will be making their rounds of speaking engagements coming out of last week’s FOMC meeting.  There is also a busy economic calendar with plenty of housing data including the Case-Shiller Home Price Index on Tuesday. Economic data will also include consumer confidence readings, Q4 GDP revision, and personal income and spending. Most importantly the February PCE index, which is the Fed’s preferred inflation report, will be released on Friday.  The markets will have to wait until next week to digest the new inflation data and the Fed’s reaction to it as the market will be closed on Friday.  We do have market holidays with an early close on Thursday at 2:00 and a full close on Friday. 

So far today MBS prices are down by just a few basis points compared to Friday’s close and the 10-year is up a few basis points to 4.24. 

Have a great week!