Mortgage rates bounced back up today as the underlying bond market continued the selling trend seen on 3 out of 4 days so far this week. In the overnight hours, bond yields (which generally correlate with mortgage rates) moved higher in concert with rising oil prices.  That said, it would be a mistake to assume this is the only correlation in town. Oil prices continued to rise sharply during domestic hours, but bond yields remained flat--possibly benefiting from safe-haven demand following heavy losses in stocks. The average top-tier 30yr fixed rate is still under its recent highs, but after today's jump, it's fairly close. This is a victory of sorts, considering 10yr Treasury yields are clearly above their recent highs.  [thirtyyearmortgagerates]

Economic data is one of the few consistent sources of motivation for interest rates in the mortgage world and beyond. In general, stronger data tends to push rates higher and vice versa. But in today's case, that correlation didn't pan out. The first of today's two important economic reports was ADP Employment. It was just barely stronger than expected, so it's no surprise that rates didn't react. The second report (ISM Services) was quite a bit stronger, with the headline index hitting its best levels since 2022.  On a vast majority of other occasions, such a result would create some clear upward pressure for rates. We can only speculate as to the absence of a reaction this time. Perhaps it was the component that tracks inflation falling to the lowest level in nearly a year. Perhaps the market is more preoccupied with geopolitical considerations.  Regardless of the reasons, we're not upset with the outcome. Rates moved about halfway back down to their recent lows after spending a few days at 2 week highs to start the week.

After spending the entirety of last week calmy holding the lowest levels in more than 3 years, mortgage rates jumped sharply higher yesterday. That said, everything's relative. Even after that "sharp" increase, the average rate was still one of the lowest in years apart from last week. There was slightly more cause for concern this morning as the underlying bond market increasingly swooned.  When bonds lost ground, rates move higher.  But unlike yesterday, which involved pervasive gradual weakness throughout, today saw a meaningful recovery shortly after the market opened. Bonds ended up making it almost all the way back to 'unchanged,' thus allowing most lenders to reissue revised rates that were slightly lower than this morning. The average lender didn't make it quite back to yesterday's latest levels, but the market movement offered an important proof of concept. Specifically, we're not necessarily destined to see a runaway rate spike in the coming days. As always, there's an important caveat: we're not necessarily destined to see anything at all when it comes to the future of rate movement.  Depending on the outcome of economic data, rates could continue higher or recover back toward recent lows. Geopolitical developments can continue adding volatility for better or worse.  If there's one take away, it's simply that volatility risks are much more pronounced this week compared to the past 2 weeks. 

Mortgage rates began the new week with a fairly quick jump back into the low 6% range (top tier 30yr fixed rate for the average lender). With the news cycle very focused on developments in Iran, most coverage attempts to correlate geopolitical events with market movement. The only legitimate way to do this would be to say that upward pressure on oil prices is translating to higher inflation implications and therefore higher rates. At many times in the past, this would be a solid conclusion. To some small extent, a case could even be made for this correlation accounting for a portion of today's weakness. But most of the big, directional moves in oil prices over the past 2 days have failed to correlated with big moves in the bond market.  Even when we zoom out to wider frames of reference, we see counterintuitive developments over the past several years. When oil peaked around $120/bbl in 2022, 10yr Treasury yields were around 3%. When oil fell sharply into 2023, bond yields continued moving up and have held flat for the last few years even as oil gently declined. Nonetheless, there are also pockets of correlation where we can see the two lines moving in the same direction. The only problem with that is that oil and rates can both respond to a third variable: economic strength. On that note, this week's economic data may be just as big of an influence on rate momentum while geopolitical developments represent a wild card that can create a backdrop of volatility.

At this point, it is getting a bit repetitive to bring up "the lowest rates in more than 3 years"--something that was officially the case twice this week. If we give rates credit for stably holding these long-term lows (and we should!), then every day this week has been the best in more than 3 years. Here's the specific record: at no other time in the history of our rate index have rates begun a week at long-term lows and experienced so little volatility. There was a somewhat similar stretch of 4 days in March 2019, but rates had only hit a 2 year low at the time. On average, when rates hit the lowest levels in more than a year, the next 4 business days see a range of 0.07-0.08%. That makes this week's 0.01% range truly special.