This is a big week for the financial markets with a packed economic
calendar and a Fed meeting scheduled for Tuesday and Wednesday. The market
is anticipating that the Fed will hike short-term interest rates on
Wednesday by 0.25%. More importantly, though, the market will be watching
the Fed's statement very closely to get a glimpse into their future plans.
Keep in mind that mortgage rates aren't directly impacted when the Fed
changes short-term interest rates. In fact, mortgage pricing may actually
improve if the bond market thinks that the Fed will be less aggressive with
future rate hikes and/or extend their massive bond buying program.
Over the past 9 years, the Fed has been the largest buyer of mortgage
bonds in the market, and that has been a large contributing factor to low
mortgage rates. For example, average supply of new mortgage bonds has
been just over $2 billion per day, while Fed purchases have averaged
roughly $1 billion per day. In fact, the Fed is scheduled to purchase up to
$1.625 billion of 30-year conventional mortgage bonds today. In other news,
a large supply of US Treasuries is scheduled to hit the bond market this
week, so that may dampen the market's appetite for mortgage bonds.
What should you do about it? Watch for mortgage bonds to bounce around between their 30-day and
200-day moving averages, but be prepared to lock your rate quickly if
bonds break below their 30-day moving average.
Economic reports that may impact mortgage rates this