Mortgage Rates Newsletter – Market Analysis
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Why Did Rates Completely Ignore This Week's Bad News?
This week, the Fed announced a reduction in its bond buying. In separate news, the big jobs report was much stronger than expected. Both of these events should have pushed rates higher. So why didn't they?
Let's start with the Fed and its bond buying adventures (also known as QE or "quantitative easing"). The following chart of 10yr Treasury yields (a broad benchmark for "rates") shows the paradoxical reactions to the Fed's previous decisions to stop buying bonds.
In other words, we knew a paradoxical reaction was a possibility , even though past precedent is never a guarantee. Beyond that, we also knew that rates were moving higher in anticipation of the Fed's eventual exit. In fact, by last week, they'd already covered as much ground as they did in 2013.
Posted 5 November 2021 | 10:53 pm
Mortgage Rates Started Flat, But Moved Lower During The Day
Mortgage rates fell today as markets decompressed following yesterday's announcement from the Federal Reserve regarding the reduction of its bond buying efforts (aka "tapering"). Despite the proximity to Fed day, markets were more inspired by another central bank today: the Bank of England (BOE).
The BOE had its own policy announcement early this morning. Unlike the Fed, there was broad disagreement about the BOE's course of action. They ended up making the more rate-friendly decision and global bond markets reacted immediately. Unsurprisingly, it was the British bond market that had the best day, but there's always a certain degree of correlation between UK and US lending rates. As US sovereign debt yields fell, mortgage-backed b
Posted 4 November 2021 | 8:17 pm
Minimal Damage For Mortgage Rates Following Fed
Mortgage rates moved higher today after the Federal Reserve announced a reduction in its rate-friendly bond buying program. Actually, to be fair, rates moved higher before the Fed made that announcement, and largely for other reasons. The biggest issue today was, in fact, a widely followed report on the service sector (ISM Non-Manufacturing PMI) which crushed its previous record high. Bonds experienced additional volatility in the afternoon following the Fed announcement, but they were able to recover back to pre-Fed levels within 2 hours.
The average mortgage lender began the day offering similar rates to those seen yesterday. Several lenders responded to bond market weakness by raising rates slightly in the middle of the day. The average b
Posted 3 November 2021 | 8:07 pm
Another Good Day For Rates, But Tomorrow is Anyone's Guess
Mortgage rates began the day moderately lower compared to yesterday's latest levels. The size of the move depends on the time of day in question due to intraday movement in the bond market. Simply put, bonds improved steadily from the beginning of the day yesterday and ultimately peaked around 11am today. In general, bond market improvement correlates with lower rates.
The first effect of this 2-day move was for the average lender to offer mid-day improvements yesterday. Those who did (a vast majority) were still able to offer even lower rates this morning. Lenders who did NOT offer mid day improvements yesterday made even bigger leaps toward lower rates. When the dust cleared, the peak to trough move accounted for almost an eighth of a percent
Posted 2 November 2021 | 7:58 pm
Mortgage Rates Catch Up To Last Week's Market Movement (That's a Good Thing)
Mortgage rates moved moderately lower today despite an absence of significant movement in the bond market. In general, when bonds improve, rates fall (and vice versa), but it's not feasible for mortgage lenders to adjust their rates offerings in relative real-time as bonds can send massively mixed signals on any given day.
Last Friday was just such a day. It began with bonds doing very poorly . The weakness was in place before the average lender published their first rate sheet of the day, so mortgage rates started out higher. As the day progressed, bonds improved enough for many lenders to make mid-day improvements to rates, but bonds suggested the improvements should have been bigger.
That's where today came in. Bonds began weaker yet a
Posted 1 November 2021 | 8:02 pm
