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Wednesday, April 6, 2022

Mortgage Rates at 10-year High

The MBA Mortgage Application Index declined 6.3% last week, following the prior week's decrease of 6.8%.

The fourth-straight weekly downturn came as a 9.9% drop in the Refinance Index was met with a 3.4% fall for the Purchase Index. The average 30-year mortgage rate extended its climb, rising 10 bps to 4.90%, and is up 154 basis points (bps) versus a year ago. Some sources, such as Mortgage News Daily, reported the 30-year fixed at 5.08%.




In afternoon action, the Federal Reserve released the minutes from the Federal Open Market Committee's (FOMC) March monetary policy meeting, at which the central bank initiated its rate hike campaign. 

The report showed that Members discussed and "generally agreed" to reduce the holdings on its balance sheet by a maximum of $95 billion—$60 billion in Treasuries and $35 billion in mortgage-backed securities—phased over three months, and likely starting in May. The move would double the rate of its last effort. 

In addition, the Committee discussed the pace at which future rate hikes should occur, with the minutes noting that, "Many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated." 

The report showed that the uncertainty surrounding the war in Ukraine deterred some from going with such a move in March. The report comes in the wake of some Fedspeak this week, where Fed governor and vice chair nominee Lael Brainard suggested yesterday a rapid pace of balance sheet reduction as soon as the May meeting, and further hawkish remarks from Philadelphia Fed President Patrick Harker today.

Treasuries finished mixed with yields sitting near three-year highs and the yield curve steepening after noticeably flattening. The yield curve spread has garnered heavy attention, with some portions of the curve inverting to foster talk of the potential for a recession on the horizon. The recent steepening of the curve brought a portion—the spread between 2-year and 10-year yields—out of inversion territory this week.

The yield on the 2-year note declined 2 bps to 2.48%, while the yield on the 10-year note rose 6 bps to 2.61%, and the 30-year bond rate advanced 5 bps to 2.62%.

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