Interest Rates Make a Move

Casey Fleming

Last week I wrote that there was little upward pressure on interest rates, and so rates would probably remain steady through the middle of the week, or fall slightly.  The ten-year bond (red line) did fall steadily until Friday, when it made a small move back up.

Rats moved down steadily this week; will they follow next week?
Rates moved down steadily this week; will they follow next week?

Mortgage-backed securities (blue line) held steady through Tuesday, and then started to follow the 10-year bond downward.  Retail interest rates (green line) are only measured once per week, but they too followed the Mortgage-Backed Securities down.  Retail rates are reported on Thursday, however, and the big move was on Friday, so barring unusual or unexpected news we should see rates continue to fall into the new week.

I’ve also been tracking the spread that lenders are demanding, which rose above the normal range of recent history at the beginning of the year and has held at an elevated range ever since.  In the chart below we can see a very slight movement downward this last week.  (The blue line is the daily margin, the red line represents a 30-day moving average to smooth it out.)  If this lasts, interest rates that you are offered could drop even if the yields on the Treasuries and Mortgage-Backed Securities do not fall.

Lenders' margins are starting to come down...maybe
Lenders’ margins are starting to come down…maybe

What’s on the calendar for this coming week?

There are no significant reports due on Monday.  Tuesday brings Job Openings and Wholesale Inventory Reports.  Both could be market-movers, but probably won’t be.  Wednesday is quiet again, Thursday the closely-watched Jobless Claims report is due.  Friday is chock-full of economic reports that could move the market.

While interest rates do not always move in unison with the stock market, this is a week where that could happen.  The market is obviously looking for direction.  If it finds footing and begins a rise this week, expect interest rates to rise.  If it remains weak or falls further, expect interest rates to fall.

Either way, look at the green line in the top chart.  This represents retail interest rates – the rates that are actually delivered to you.  Note that last week’s line is very close to the lowest point in the last 16 months.  How likely is it that it could go much lower?

Casey Fleming, Author The Loan Guide: How to Get the Best Possible Mortgage (On Amazon)
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This article represents the opinion of Casey Fleming, and not necessarily that of C2 Financial. This analysis was prepared with the best information available at the time it was written. Neither Casey Fleming, nor C2 Financial, have any magical insider information about bond markets, real estate markets or mortgage markets that would make economic projections any more reliable than any other source. No warranty is made that the outcome will reflect the projections in this article, and neither Casey Fleming nor C2 Financial are responsible for decisions that you make regarding your own choices about your real estate or mortgage or those of your clients.

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