Silicon Valley Bank and Mortgage Rates

Silicon Valley Bank and Mortgage Rates. Has the pivot begun?

Captain Renault: “I’m shocked, shocked to find that gambling is going on in here!”

Janet Yellen: “The reforms that have been put in place mean that we’re not going to do that again,”

Steve Silver (@SteveSilverNow): “Failure to Mark-to-Market assets = Bailout”

Not a Bailout = Bailout

Several years ago (right after the Fed got involved with MBSs after Covid) I sent an urgent email to my clients recommending that if they were considering refinancing “do it now because rates will be artificially low for a brief time period”

One year ago, I sent out another that stated “The Fed is seriously behind the curve, they’ll raise until they break something”

Fed will Raise Until they Break Something

Last month, sent another predicting that rates will rise a bit more, however, it’s time to start watching for short-term rates to break and the yield curve to drop…then watch to see if mortgage rates will narrow the gap (with USTs)

Not yet sure if this is that moment…feels like it could become a distant memory in a few days….might need 1 or 2 more shocks for the full effect.

However, the event itself is pivotal. And fodder for politicians into the 2024 election.

Mortgage Rates

Re: Mortgage Rates…the FED, not marking-to-market mortgage bonds held by SVB tells you all you need to know.

The risk of holding MBSs just ratcheted down a notch.

Watch the Spread

An indicator to watch is the spread between 30yr mortgages and 10yr USTs…if that spread starts to narrow, then mortgage rates will drop to a more normalized 1.5 spread (+/-) over USTs.