John Higgins

NMLS #136061

The Mortgage 1 Team Blog


MMG Weekly | Jan. 23, 2023


A Look Into the Markets

Bad economic news helped home loan rates touch the lowest levels in months. Let's discuss what happened and see what is coming next week.

Producer Prices Are Falling

The Producer Price Index, which is an inflation reading on what producers/wholesalers pay for goods and services, showed a larger than expected decline. It was also the lowest reading since March 2021.

This is good news, because if producer prices fall, it leads to consumer prices falling, which leads to lower rates and less Fed rate hikes.

It appears that both inflation and long-term rates have peaked.

Weak Economic Data Elevates Recession Fears

A bunch of weaker than expected economic reports cast a dark cloud over stocks, with bonds and rates the beneficiary.

Manufacturing reports in New York and Philadelphia highlight an economic slowdown and a very weak Retail Sales number for December, showing the consumer cutting back on spending.

In the recent past, stocks had moved higher in response to weak news on the notion the end of Fed rate hikes is near. But this week, stocks slid lower on the bad news because the bad news may also mean a recession and not just the end of Fed rate hikes.

On Thursday, the 10-yr Note yield touched 3.32% for the first time since mid-September which suggests the bond market sees a slowdown and the need for the Fed to stop hiking rates.

The Standoff Continues

The Federal Reserve and the bond market disagree on the Fed's position on rates. The Fed says it wants to keep rates higher for longer, yet the sharp decline in long-term rates and wide yield curve inversions is the bond market saying the Fed is wrong.

The good news? The markets are now pricing in a .25% Fed rate hike on February 1st. We could very well see just one more .25% rate hike in March but that will be based on the incoming data.

Bottom Line:

Home loan rates continue to drift lower; sellers are eager to make deals and the labor market is strong. Now is a great time to highlight the current "buyers' market" while it exists.

Looking Ahead:

Next week is the "quiet period" for the Fed, where they do not speak or comment on monetary policy one week prior to the next Fed Meeting. But the week still carries a bunch of headline risk events, including the Fed's favored gauge of consumer inflation, The Personal Consumption Expenditure (PCE) Index.


Mortgage Market Guide Candlestick Chart

Mortgage-backed security (MBS) prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 5.5% coupon, where currently closed loans are being packaged. As prices go higher, rates move lower and vice versa.

MBS prices are right at a ceiling of resistance, which is limiting further improvement in rates. If MBS can move just slightly higher and above this nearby ceiling, rates will likely improve a bit more. The opposite is true.


Chart: Fannie Mae Mortgage Bond (Friday January 20, 2023)



Economic Calendar for the Week of January 22 - 26


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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