If you've been paying attention to the news, you're likely aware of the Silicon Valley Bank collapse. The bank announced last Wednesday that it had sold part of its portfolio at a $1.8 billion loss, with resolutions sought over the weekend into this week.
Markets jumped sharply today when regulators announced their plans to battle the bank's fallout. Mortgage rates also plunged as an automatic stabilizer to SVB's collapse, today hovering around 50 basis points lower compared to last week. The average 30-year rate could be at 6.5% after hovering at 7% throughout last week.
The recent failure of Silicon Valley Bank was an outside event that's caused uncertainty, even panic, in financial markets and monetary policy. When this happens, investors shift money towards safe assets, with the safest being U.S. Treasury notes and bonds.
The proximity to the FOMC meeting on March 21-22 means that Fed policymakers will have a harder time judging whether financial conditions can take another rate hike, and if so, how much can be endured.
They have to make this decision using economic data compiled before the collapse of SVB, which showed a strong labor market. The February reports we'll have tomorrow, Tuesday, March 14th at 8:30 AM will probably show we're still facing tough inflation pressures, with strong consumer spending.
So what does this all mean? Whatever the Fed decides to do with rate hikes, whether pausing them, or moving forward with another 25 or 50 basis point hike during the March 21-22nd meeting, we'll likely see some harsh doubts and criticism on policymakers' ability to guide our economy, especially during a time of repair post-pandemic-era stimulus.
I predicted that on May 10th, 2023, one week after the FOMC May 2-3rd meetings, we might see a change in the direction of ongoing mortgage rates for the year. I'll update my thoughts on this after I get a chance to review tomorrow's reports, and we'll have to see what continues to unfold this week and at the March 21-2nd meeting.
Data from Mortgage News Daily, the U.S. Treasury, and NAR Chief Economist Dr. Lawrence Yun.
So what does this all mean? Whatever the Fed decides to do with rate hikes, whether pausing them, or moving forward with another 25 or 50 basis point hike during the March 21-22nd meeting, we'll likely see some harsh doubts and criticism on policymakers' ability to guide our economy, especially during a time of repair post-pandemic-era stimulus.
I predicted that on May 10th, 2023, one week after the FOMC May 2-3rd meetings, we might see a change in the direction of ongoing mortgage rates for the year. I'll update my thoughts on this after I get a chance to review tomorrow's reports, and we'll have to see what continues to unfold this week and at the March 21-2nd meeting.
Data from Mortgage News Daily, the U.S. Treasury, and NAR Chief Economist Dr. Lawrence Yun.