Mortgage rates outperform as Fed shows no fear 📉🏦💪
Midweek Market Update
Included in this update are the following sections:
MIDWEEK RECAP ⏪
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The 2-Year Treasury is a strong barometer of where markets think the “Fed Funds Rate” should be set, which I mentioned in this Substack post.
It is also a widely held belief that the 2-Year influences Fed policy.
This is why I titled the chart below “the tail that wags the dog”.
Just as the 2-Year chart implied, at the conclusion of today’s FOMC meeting the Fed announced they would keep the “Fed Funds Rate” unchanged at 3.75 – 4.00.
The decision to hold steady is a show of defiance in the face of the Trump Admin’s vocal pressure for more rate cuts.
That pressure ratcheted up two-weeks ago when the DOJ subpoenaed the Fed, specifically Chairman Jerome Powell.
This confrontational approach toward domestic and foreign policy has been a trademark of Trump 2.0, causing weakness in U.S government bonds.
Perhaps it is a way for bond investors to escape the chaos surrounding government affairs, or maybe it’s blind optimism that Trump will actually spend $200B on agency MBS, whatever the reason … mortgage bonds continue to outperform government bonds.
The LendZen Mortgage-Treasury Spread, which compares an actual yield on MBS to the 10-Year Treasury Bond, hit another multi-year low today.
See more in the Mortgage Spreads section below.
This also means mortgage rate prices continue to hover near multi-year lows.
See more in the Rate Price Index section below.
IMPACT CALENDAR 📅
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Today’s FOMC announcement has been the main focus, overshadowing the consumer confidence and home price data released earlier in the week.
The various reports remaining the next two days can still have a meaningful impact, especially the double-dose of survey data on Friday.
RATE PRICE INDEX 📉
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Mortgage rates do not rise or fall, instead the PRICE of rates change.
The LendZen Index calculates a daily change in the price of mortgage rates by tracking a spectrum of mortgage-backed securities (MBS).
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24-Hour: -0 bps (-$0 per $100K)
5-Day: -12 bps (-$116)
10-Day: +10 bps (+$98)
30-Day: -28 bps (-$278)
Learn more about the LendZen Index and explore the full data series at LendZen.substack.com
MORTGAGE SPREADS 🧈
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Published daily with the LendZen Index is the LendZen Mortgage-Treasury Spread.
The LMTS uses actual bond yields to create a historically consistent, and reliable, data set.
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Jan 21: 0.81
Jan 28: 0.73
24h: -1 bps
5d: -8 bps
12m Avg: 1.19
YoY: -57 bps
Learn more about the importance of accurate mortgage spreads on this Substack post.
Mortgage bonds continue to outperform government bonds, helping the spread between MBS yields and the 10-Treasury Note to hover at multi-year lows.
RATE LOCK GUIDE 🔒
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The LendZen LOCK-O-METER provides borrowers with a risk-weighted score based on how various macroeconomic events, including market data, central bank announcements, and geopolitics, each historically impacts the price of bonds.
higher risk scores = lean towards locking
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Closing Window
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[ 15 Days ] — 83 🔴
Although rates are holding their ground NFP approaches next week, leaving this short window vulnerable.
[ 30 Days ] — 71 🟠
Event risks are the outlier to watch if you continue to float, but mortgage spreads remain a stabilizing force amidst the chaos.
[ 45 Days ] — 58 🟡
The goal should be to survive this full cycle of Big-3 data and look for markets to reestablish a clear direction.
[ 60 Days ] — 47 🟡
The longer outlook still favors floating, with global growth concerns and strong bond demand outweighing near-term turbulence.
Thanks for reading.
If you want to shop real-time mortgage rates and get instant qualification results without providing any contact information visit LendZen.com
LendZen provides a fully automated mortgage shopping experience that gives you anonymous access to all mortgage rates with full transparency of costs upfront as bond prices change.
LendZen Inc. is an equal opportunity mortgage lender, NMLS 375788.