The mortgage market has been rocked by the recent collapse of Silicon Valley Bank (SVB) Financial. This unexpected turn of events has caused major shifts in the mortgage rate forecast, leading to widespread uncertainty and volatility in the market. Even if you haven’t heard of SVB before, it was actually a very big bank – the 16th largest in terms of the amount of money it had. Sadly, it’s also the second biggest bank failure ever, after a bank called Washington Mutual failed 15 years ago.

SVB Financial was one of the biggest factors in rates last week, as fallout from the bank’s collapse drove money into long bonds as a flight to safety. This has led to speculation and concern that other similar banks may face similar issues, leading to even more uncertainty in the market.

As a result of the SVB Financial collapse, lock desks are struggling to price in all the volatility, leading to big gaps among lenders until the dust settles.

The impact of the SVB Financial collapse has been felt throughout the mortgage market, causing huge moves in bonds, and leading to a true flight-to-safety that we haven’t seen in years. Traders are freaking out about the bank situation, leading to a significant drop in rates. This is not due to any jobs or inflation data, but rather the unfolding events surrounding our banking system that have shaken the markets like an earthquake.

The mortgage rate forecast has undergone a tremendous shift as a result of the SVB Financial collapse. Instead of seeing a forecast for the Fed to hike rates to 5.5%, 5.75%, or even 6%, we are now seeing fed futures calling for an immediate pausing of all Fed rate hikes at 4.5%. This is a dramatic shift that will have a major impact on borrowers and lenders alike.

In short, the mortgage market is experiencing a significant drop in rates, not due to any jobs or inflation data, but because of the unfolding events surrounding our banking system. Borrowers need to stay informed and be prepared for the unexpected, as the financial world can be unpredictable at times. While this may cause some short-term disruption, with the right knowledge and preparation, we can navigate any storm.

In this week’s financial world, three factors have the potential to impact rates significantly:

1. SVB -The first and most significant factor is the fallout from Silicon Valley Bank. Last week, we saw a flight to safety as a result of this fallout, with money moving into long bonds. There is speculation and concern that other similar banks may face the same issues, which is further fueling this trend.
2. Inflation – The second factor is inflation, which is always a hot topic in the financial world. This week we will receive important economic data in the form of the CPI and PPI. This information is crucial for the Federal Reserve, as they need it before their FOMC meeting next week.
3. Central Banks – The European Central Bank (ECB) is expected to make an important interest rate decision this week. At their last meeting, they announced their intention to raise rates by 50BPS. However, there is uncertainty around whether they will back off from this forward guidance at the upcoming meeting.

Overall, this week is set to be a highly eventful one in the financial world. With these three factors potentially impacting rates significantly, it will be interesting to see how things unfold. Keep an eye on the markets to stay up to date on any developments.

Technicals:

The UMBS 5.5 coupon refers to a type of investment product known as a mortgage backed security, which is used to fund mortgages. It is currently trading at a price of 100.58, which is up 88 basis points (a measure of percentage points) for the day.

Meanwhile, the 10-year Treasury yield refers to the interest rate the government pays to borrow money for 10 years. It has made a significant move and is currently at a rate of 3.49%, which is the highest level seen since January.