MMG Weekly | April 1, 2024

A Look Into the Markets

Mortgage rates improved slightly in this holiday-shortened week. Let’s discuss what happened as the first quarter of 2024 comes to an end and we brace for a surprise on Monday, April Fool’s Day.

Fed Members Not Aligned

At the most recent Fed Meeting, Fed Chair Jerome Powell led the markets to believe there will be three rate cuts in 2024. The Federal Reserve’s dot plot, which is a forecast of interest rates amongst the members, also suggested three rate cuts.

Yet to start the week, Atlanta Fed President Rafael Bostic, said he only sees one rate cut in 2024. This lack of unity, amongst the Fed members, creates volatility and uncertainty, which we continue to see in the financial markets.

The Global Slowdown

Interest rates are like bad economic news here and abroad. Over the last couple of weeks, we have seen numerous warning signals from major countries as they either have entered a recession or are threatening to do so. At the same time, there have already been surprise rate cuts by other central banks around the globe, like Switzerland, to stave off a slowing economy. This is important because if rates around the globe move lower in anticipation of a local recession, it puts downward pressure on our interest rates here at home.

Big Friday News, Markets Closed

On Friday, the financial markets are closed in observance of Good Friday. Yet, there are a couple of huge headline risk events taking place. First, the Fed’s favored gauge of inflation, the Core Personal Consumption Expenditure index (PCE) will be reported. The Fed wants to see this number move sustainably towards 2%. Expectations are for it to come in at 2.8% year-over-year. If the number is reported hotter bonds may not like it, the opposite is true.

At lunchtime on Friday, Fed Chair Powell will speak and offer thoughts on the economy. You never know what can be said, and how it might move the market.

With financial markets closed on Friday, we will need to wait until Fool’s Day Monday, April 1st to see the reaction. Let’s hope the markets don’t make a fool of us.

Key Levels

Both the Treasury and the mortgage-backed security market are trading right at key levels, placing no large bets in advance of Friday’s headline risk. This coming week may determine whether interest rates improve further or get turned away higher.

Springtime Is Here

We are seeing housing inventory perk up across the country for the Spring home-buying season. Many people are finding opportunities with rates stabilizing off the highs of last Fall. Pent-up demand is being released as people finally say life goes on.

Bottom Line: The Spring home-buying season may pose a terrific opportunity for those looking to make a move. Interest rates are not expected to decline sharply in the absence of a surprise recession signal. So, it may be wise to take advantage while others may sit on the sidelines.

Looking Ahead: Next week will be interesting. Come Monday, April 1st, the markets will get to react to the Core PCE mentioned above. Then throughout the week, we will see Fed Members offer their opinions on inflation, the state of the economy, and the likelihood of rate cuts. But the main event will be the March Jobs Report on Friday. 183,000 jobs are expected to be created and the unemployment rate is expected to be unchanged at 3.9%. If the numbers come in poorly, it will further the notion of a June rate cut. However, if the numbers are strong, we will see more uncertainty, more volatility, and the chance of a June rate cut fading away.

Mortgage Market Guide Candlestick Chart

Mortgage bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 6.0% coupon, where currently closed loans are being packaged. As prices move higher, rates decline, and vice versa.

If you look at the right side of the chart, you can see prices rising, meaning lower rates. Prices are right near a ceiling of resistance at $101. For rates to improve further, we need to see prices move above this ceiling.

Chart: Fannie Mae Mortgage Bond (Friday March 29, 2024)


Economic Calendar for the Week of April 1 – 5

John Higgins

NMLS #136061

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors.

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.


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