Rate Watch Report

Mortgage watch

Mortgage Rates are moving higher this week as Mortgage Bonds (MBS) and Treasury Bonds (TSY) are getting crushed (see chart).


This morning’s selling is exasperated by Feds decision to NOT extend the SLR exemption (click here if you do not understand SLR exemption:  https://www.cnbc.com/2021/03/19/the-fed-will-not-extend-a-pandemic-crisis-rule-that-had-allowed-banks-to-relax-capital-levels.html. I wish I could understand how this makes sense, especially considering the Fed is buying $120 billion per MONTH of bonds and now the very market that they are pulling bonds out of to create liquidity, they are ok with 7 months of their purchases going to toward absorbing the bank sales? If you look deeper into this problem, you must realize that bank deposits are a liability. Yes, a liability! Someone is putting their money in bank, essentially making the bank a loan that can be recalled at any time!

The banks must maintain liquidity to cover these deposits. So, more deposits create the need for more liquidity. PERIOD! Now, consider $1.9 Trillion in fresh new stimulus money needing a bank to deposit these funds into. If I want all these deposits, I need to create more liquidity. So, if I were a banker, there are only 2 ways to do this:

  1. I can sell more stock in the open market and create new cash but dilute my shareholders and drag down my share price.
  1. Or, I need to see ill liquid assets to create the cash that will allow me to take on new deposits.

The fastest and easiest thing to sell will be the MBS and TSY holdings that treasuries that JUST yesterday did not count against their liquidity requirements. I expect this selling to continue and rates to keep moving higher.

Bottom Line: LOCK as escrow opens!


Keith Murphy Branch Manager – Essex Mortgage NMLS #330827

Direct: 714-309-1140

Apply: www.GoTeamMurphy.com

About the Author

Tim Morissette, also known in the community as Mr. Foothill Ranch, offers over 46 years of real estate experience which has given him an established reputation and unmatched market knowledge. He is joined by his wife, Michele and sons Matt and Jeff, as they continue to offer personal service with an emphasis on achieving his clients’ real estate goals.  This unique combination of traits has led to his proven track record of referral and repeat business. This can be witnessed by the trust of homeowners in Foothill Ranch where he has sold twice as many homes and represented three times more buyers than the next-leading real estate agent for the last 26 years.

As residents of Foothill Ranch since 1994, Tim and Michele are actively involved in the community by fundraising for Foothill Ranch Library, Make-a-Wish Foundation, Cancer Society, Homes for Habitat, Relay for Life, South County Outreach, and the local church and schools. Tim enjoys sponsoring community-wide garage sales, paper shredding and e-waste recycling event, an Easter egg hunt, & a Meet Santa Event.

Tim and Michele are dedicated to their family of four sons, daughter-in-laws, and grandchildren. As a family, they enjoy many outdoor activities which include camping, spearfishing, mountain climbing and exploring the miles of hiking and equestrian trails in Foothill Ranch and the Whiting Ranch Wilderness Park. Tim and his sons are also avid snowboarders and enjoy mountain biking and lobster diving. Family is a top priority in the Morissette household. They look forward to helping more families achieve their dreams of homeownership.