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April 11th, 2022 – Will the Short Week Help or Hurt? Monday Morning Update

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Hey, it’s Mike Lynch with AmeriFirst financial. It’s time for your Monday morning mortgage update for the week of April the 11th. I hope everybody had a fantastic weekend. Love the cooler weather got out of my mountain bike this weekend and checked off some of those trails on the big foot mountain bike challenge.

And I talked about this last week. If you’re a mountain biker, or if you just love the trails click on the link in this video, check out the Bigfoot mountain bike challenge. It’s a great community event all over Northern California. And I encourage you to check it out and see what it’s all about.

So what happened last week and what are we looking at this week? So last week, Unfortunately, another big sell off of the bond market. We saw a hundred basis point sell off, meaning the bond market went down, money flowed out of that bond market and mortgage rates went up. We’ve been really moving in a stair stepper step pattern on rates.

And I want to show you a visual here. This is a snapshot of the trading and mortgage backed securities in the bond markets, a six months snapshot. If I move all the way over to the left here, that is November and all the way over to the right is today. In the middle of this obviously is January 1st and since January 3rd, which was a Monday after the the holidays we have seen the bond. Take a very, very drastic downward movement, which means money’s flowing out and mortgage rates are going up. We’ve talked about why this is happening, but really what we’re seeing is a stair-step pattern, meaning that rates go up, money flows out of the bond market. It moves down when you see that downward pattern, that means rates going up and then it levels off. And then some other economic news come out, comes out, rates, shoot up, and then we see a leveling off and you can see the pattern. In the yellow and I’m circling it, read that stair-step or PA stair-step pattern. And we’ve just seen it really over the last few months. So at the end of this chart at the bottom, there are we in a stair-step pattern here where maybe we’ll see these rates level off a little bit. It’s possible. So let’s talk about. What’s moving the market this week, we’ve got inflation. We’ve had central banks and a bunch of other stuff. So inflation inflation’s big. We got CPI coming out sooner. Price index PPI came out, producers, price index in port export reports coming out all big inflationary numbers.

The last month, when these reports came out 40 year highs for inflation, and we expect these numbers to be even. Folks, this is just not good for mortgage rates. And until we get a curb on this inflation, we’re going to see these rates slowly creep up central banks is the third thing. So our fed isn’t meaning that a lot of central banks, a handful of them around the world are meeting. Their own version of their fed meeting. They’re going to look at their rate policy and we really expect them to raise rates, just like we have been doing. We expect our fed to raise rates six more times in the next year. That’s the primary way the fed fights inflation and the same for other countries. They’re experiencing inflation as well. So we’ll be watching what those other central banks do to see if there is a pattern of raising those rates moving forward, and then a bunch of other stuff. So oil prices are down less demand around the world right now. And that’s actually good for mortgage rates.

If these prices get, get down low enough, if we actually see prices go to 80. Bucks a barrel, which we haven’t seen that actually could significantly move mortgage backed securities. We don’t expect them to go down that much this week at all, but again, we’re starting to see a pattern starting to see signs of a slower economy in the U S there’s some reports coming out a slower. Is it a is a good thing for mortgage rates? Obviously it’s not great for the economy. But as inflation is up, people are spending less money. As the fed raises the fed rate that causes less money spending. And this is the whole point of it. It slows lowers inflation and then consumer debt is up, not a good sign.

We’re going to be watching some of those numbers roll out over the next couple of weeks. Retail sales is coming out this week and that’ll tell us if people are buying stuff. And then we have a short week it’s good Friday this Friday. So the bond market’s closed and then it’s also closed a half a day on Thursday. So it’s only opened in the morning. So. That actually could be a positive thing for rates. So what are we looking at this week? It’s a very busy week volatile week. Everything’s dumped on the front end of the week. And then the last week we expect a Thursday and Friday, we expect really some calmness. So what can hurt rates this week? Inflation bottom line. What can help rates if we see oil prices go down a little bit more. And if we see that long weekend caused those rates to go down to why is that? Because. A long weekend. Typically the bond investors, people park their money in the bond market, kind of a flight to safety so that they don’t experience any of the volatility over the weekend. And so maybe some money will be parked in the bond market, which could cause those rates maybe not to go down, but at least not to go up. So we’re starting the week cautiously floating with a easy trigger finger to lock rates. If we see any changes, have a fantastic. If you know, anybody could benefit this video, please forward it to them.

 

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