The last week has been fairly non-eventful. Bond traders are squaring positions getting ready for this week’s all important CPI report due out Tuesday morning followed by the Fed’s meeting and expected rate hike on Tuesday and Wednesday.
Check out my video above for an update on the past week’s movement and this week’s potential market movers.
Average 30 year conventional fixed rates for excellent scenarios with a 1 point discount charge are right around 6.25% (6.125% APR) with 15 year rates around 5.50% (5.625% APR). These rates are 0.125% higher for 30 year notes and flat for 15 year notes compared to last week’s rates.
It’s been more than a month since the last CPI report sent mortgage rates lower at the fastest single-day pace on record. Since then, apart from one interesting reaction to Powell’s speech two weeks ago, the main order of business has been to wait for the next CPI report and the Fed announcement that would follow a day later. As the new week begins, we’re less than 24 hours away. That makes today a placeholder of the highest order. There was some volatility after the 1pm 10yr Treasury auction, but it pales in comparison to what tomorrow may bring. A 0.5% rate hike is baked into mortgage pricing already. Higher than forecast CPI data will push rates up.
However, Consumer Sentiment data last week suggested lower inflation readings to come. The survey asks consumers for their price outlook over the next year. Friday’s results showed a big drop from the previous survey to the lowest levels in 2022.
A survey of consumer’s thoughts on inflation might seem trivial compared to big ticket economic reports, but this particular data point often tends to foreshadow big picture shifts in inflation momentum.
The Mortgage Banker’s Association reported that purchase applications for mortgages were at their lowest level last week since 2015. Buyers continue to hampered by low inventory, high prices, and high rates. Most clients I talk to are shocked by monthly payments for rates in the 6s and seem to be wary of paying top dollar for homes along with higher than anticipated mortgage rates.