Mortgage Rates Analysis
Current Trend Direction: Higher - appears 2022 rate peak was made
Advise Your Clients: Floating some files into the long weekend
Current Price of FNMA 4.5% Bond: $100.84, +50bp
Today may be the first day of the 2022 recession. Yesterday, the Atlanta Fed's GDPNow model showed a decline of 1% for growth in Q2 and comes after the -1.6% in Q1.
A few things happen when the economy is in a recession:
- Long-term rates don't move higher
- The Fed can't raise rates "expeditiously"
- Energy prices are likely to move lower
- Home price gains slow
Treasury yields are falling hard today. The 10-year yield has declined to 2.88% from 3.50% seen in mid-June. Mortgage Bonds have risen nearly 200bp since the big 0.75% fed rate hike. And the 2-year Note yield has fallen to 2.81% from 3.50% as well. The bond market, which controls the Fed, is sounding the alarm that the Fed can't hike rates as much as they want.
Stocks had a terrible first half after the S&P 500 hit a record closing high in early January. The S&P suffered its worst first-half percentage drop of a year in 52 years, the NASDAQ had the largest first-half percentage decline in its history while the Dow suffered its biggest first-half percentage plunge since 1962.
It is appearing core inflation may have peaked. Yesterday's Core PCE was a bit light and another reason for the bounce higher. Longer-term inflation expectations in both the 5- and 10-year rates have fallen sharply. This will also help long-term rates.
There is no Fed support today. Speaking of the Fed - they shrunk the balance sheet by only $1.5B in June and is now still nearly $9T.
Technically, after the recent gains, Mortgage Bonds are now pressing up against resistance one at the 50-day Moving Average ($100.90). The 10-year yield is 2.88%.
From a pipeline management standpoint and heading into the long holiday weekend, float most files with the rate peak likely behind us.
Source LeaderOne Financial