Morning Report: Awaiting the Fed

Vital Statistics:

S&P futures4,41765.2
Oil (WTI)86.871.23
10 year government bond yield 1.78%
30 year fixed rate mortgage 3.73%

Stocks are rebounding as we await the Fed’s decision. Bonds and MBS are flat. Oil is rallying on Ukraine tensions.

The Fed’s decision is set for 2:00 PM EST. While no changes in the Fed Funds rate are expected, the focus will be on the balance sheet and the reduction of the central bank’s holdings of mortgage backed securities and Treasuries. This could have an effect on MBS prices which would affect rates. Be careful locking around that time. Jerome Powell will hold a press conference at 2:30.

Mortgage applications fell 7.1% last week, according to the MBA. The purchase index fell 2% while refis fell 13%. “All mortgage rates in MBA’s survey continued to climb, with the 30-year fixed rate rising for the fifth consecutive week to its highest level since March 2020,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. He noted the 30-year fixed rate is now 77 basis points higher than a year ago. “Unsurprisingly, borrower demand for refinances subsided, with applications falling for the fourth straight week. After almost two years of lower rates, there are not many borrowers left who have an incentive to refinance. Of those who are still in the market for a refinance, these higher rates are proving much less attractive to them.”

The IMF has downgraded its outlook for global growth from 4.9% to 4.4%. Supply chain issues are expected to last through mid-year and then abate.

Flagstar reported earnings that came in slightly below expectations. Mortgage originations fell to $10.7 billion, which is down 15% from the third quarter and 19% from a year ago. Gain on sale margins fell to 1.02%, which was a big decline from 1.5% in the third quarter and 1.93% a year ago. The MSR portfolio multiple increased from 1.08% to 1.12%.


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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