US initial jobless claims drop more than expected

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Published Date 10/5/2017

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are moving slightly higher so far today.  The MBS market worsened by -3 bps yesterday. This wasn't enough to worsen mortgage rates or fees.   The market experienced moderate volatility yesterday.

This Week's Rate Forecast: Neutral

Jobs: Initial Jobless Claims were lower than expected (260K vs est of 265K), the more closely watched 4-week moving average dropped from 277,750 down to 268,250. The September Challenger-Grey Job Cut report showed that only 32,346 corporate layoffs/cuts were announced which is a very low level.

International Trade: Our Trade Deficit hit $-42.4B which was a tad better than market expectations of $-42.7B. We are not sure yet how the hurricanes impacted this data as many ports were shut down and prevented both imports and exports.

Factory Orders: The August reading was better than expected (1.25% vs est of 1.0%) some of the internals show some improvement like core capital spending rising at a 0.9 pace to 1.1%.

Fed: We have several today including one of the front-runners for Yellen's job. Jerome Powell, John Williams, Patrick Harker and Esther George will all speak today.

Philly Fed President Patrick Harker (voting member) kicked us off today, and during an interview with CNBC, he said he has a December rate hike "penciled in" and is also still projecting 3 rate hikes in 2018.

Geopolitical: The House has said that they will pass their FY 2018 budget by the end of the day. If that is the case, it would the move on to the dysfunctional Senate. But it is an important first step for Tax Reform because you cant have reform without a budget.

Eurozone: We got the Minutes from the last ECB Meeting, there was nothing there to impact trades.

Great Britain: PM Theresa May is under fire after a very poor showing during a conference speech. It's being reported that as many as 20 to 30 Tory party MPs (Member of Parliament) will be writing letters calling for her resignation. IF that is the case, then it could be out as soon as December and will a large amount of uncertainty regarding the future of Brexit.

This Week's Potential Volatility: Average

We're likely to have another day of mortgage rates slipping slightly higher on relatively low volatility.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

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Daniel Harwood

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Email: daniel.t.harwood@gmail.com

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