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Daily Rate Update: May 11th-15th

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Friday – May 15, 2020

The pandemic induced shutdown put a big dent in retail stores across the nation with no sector left undamaged. April Retail Sales fell a record 16.4%, worse than the -12% expected. Gas stations, as well as restaurants and bars, were also impacted along with clothing stores while grocery stores saw gains. March fell by 8.3% as the shutdown began mid-month. Some of the big losses were seen in clothing stores (-78%), electronics and appliances (-60%), furniture and home furnishing (-58%), sporting goods (-38%) and bars and restaurants (-30%).

Consumer attitudes haven’t plunged in early May as much as expected due in part to the massive stimulus measures enacted by Congress through the CARES Act. Consumer Sentiment rose to 73.7 in May from 71.8 in April and above the 67.4 expected. “The CARES relief checks improved consumers’ finances and widespread price discounting boosted their buying attitudes,” said Richard Curtin, chief economist for the Surveys of Consumers, in a statement. Coronavirus update from Johns Hopkins as of this morning: Here in the U.S., there are 1,417,889 cases of the virus with 85,906 total deaths while 246,414 have recovered. There are 4,444,670 cases of the virus reported worldwide, 302,493 deaths while 1,588,858 have recovered from the virus. Many states across the nation are beginning to reopen slowly while some are still on stay-at-home guidelines. New York, which was set to partially end sat-at-home orders today, has been extended to June 13, Governor Cuomo announced today.

Courtesy of Mortgage Market Guide

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Thursday – May 14, 2020

On Tuesday, to help homeowners who are in COVID-19 related forbearance, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac are making available a new payment deferral option. The payment deferral option allows borrowers, who are able to return to making their normal monthly mortgage payment, the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity. FHFA Director Mark Calabria said, “This new forbearance repayment solution responsibly simplifies options for homeowners while providing an additional tool for mortgage servicers. Borrowers who can pay their mortgage should, because missed payments remain an obligation that will ultimately have to be repaid.”

The unemployment line continues to grow. Nearly 37 million people are now unemployed across the nation in the past seven weeks due to the pandemic induced shutdown of the U.S. economy. For the week ended May 9, 2.981 million Americans filed for first-time unemployment benefits, worse than expectations of 2.475 million. The worst of new claims could be in the rear-view mirror and has been declining since the 6.87 million record for the week ended March 28. The four-week moving average, which irons out seasonal abnormalities came in at 3,616,500 down 564,000.

Mortgage rates remained near record lows this week as the coronavirus fears cast a cloud of uncertainty over the markets. Freddie Mac reports that the 30-year fixed-rate mortgage rose two basis points to 3.28% with 0.7 in points and fees. A year ago the rate was 4.07%. Rates should remain low for the foreseeable given the current environment.

Courtesy of Mortgage Market Guide

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Wednesday – May 13, 2020

Mortgage rates inched higher in the latest week though they remain near historic lows. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage rose three basis points to 3.43% with 0.29 in points and fees. The MBA’s Market composite Index, a measure of total mortgage loan application volume, rose 0.3%. The Refinance Index fell 3% while the Purchase Index was up 11%.

Fed Chair Powell was speaking virtually this morning to the Peterson Institute for International Economics on the current state of the coronavirus and what the fallout could be. Mr. Powell uttered some concerns this morning at his speech at 9:00 a.m. ET and his words have fueled a sell-off in the U.S. stock markets. Fed Chair Powell says the path ahead is highly uncertain with significant downside risks to the economic outlook. Mr. Powell went on to say that additional relief may be needed and he is concerned of a prolonged recession with a weak recovery. Mr. Powell signaled that the Fed doesn’t see negative rates in the future.

Courtesy of Mortgage Market Guide

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Tuesday – May 12, 2020

The coronavirus pandemic has not only impacted the health and well-being of many Americans but has also inflicted great harm on small businesses across the country due to the shutdown. The NFIB Small Business Optimism Index fell in 5.5 points in April to 90.9, with owners expressing certainty the economy will weaken in the near-term, but expecting it to improve over the next six months. In addition, the percent of owners thinking it’s a good time to expand lost 10 points falling to three percent, its lowest level since March 2010.

Consumer inflation plunged as expected in April and showed the largest decline since December 2008. The Consumer Price Index (CPI) declined by 0.8% in April after the 0.4% drop in March. The Core CPI, which strips out volatile food and energy, fell 1.4% year over year, the largest decline on record. The declines were due in part to falling demand for gasoline and services. In contrast, food indexes rose in April, with the index for food at home posting its largest monthly increase since February 1974 as households stocked up during the state lockdowns.

Courtesy of Mortgage Market Guide

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Monday – May 11, 2020

The week’s economic calendar is on the light side with data from the inflation reading Consumer and Producer Price Index along with Retail Sales and Consumer Sentiment. Earnings season will continue and could impact the markets as future guidance has been put on hold due to the pandemic. Stocks are lower after Germany and South Korea reported a pick-up in new virus cases after lifting some restrictions. ed Chair Jerome Powell will be speaking via webcast hosted by the Peterson Institute for International Economics at 9 a.m. ET on Wednesday.

The U.S. bond markets will be under pressure this week as a massive amount of new supply will be hitting the markets. This week, $96B in supply will be offered this week starting with today’s $42B 3-year Note auction. The backup in yields last week is directly attributed to the Treasury recently announcing they will need to borrow $3 trillion though the 3rd Quarter. In addition, the Treasury will need to borrow more, possibly much more, before this is over to fund the stimulus programs enacted by Congress. Come May 20th the Treasury will start selling a new 20-year Treasury bond,$20B worth, to start paying for the enormous stimulus package.

Courtesy of Mortgage Market Guide

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