Mortgage Rate Watch
Mortgage Rates Drop Sharply After Inflation Data (But Bounce a Bit After The Fed Announcement)
It was an incredibly high consequence day for the bond market and, thus, mortgage rates due to the confluence of two extremely important events. The first event was the monthly release of the Consumer Price Index (CPI), which is one of the two economic reports with the far more power to influence interest rates than any other.  The other report is the big jobs report that came out last Friday.  As much as the jobs data hurt, today's CPI helped.  It brought the average top tier 30yr fixed scenario down under 7.0% by a hair--one of the biggest single day drops in months. The good times lasted, but they got less good after the afternoon's Fed announcement.  To be precise, it wasn't the announcement itself, but rather the Fed's updated rate projections that did most of the damage.  After the last round of projections (in March) showed 3 rate cuts in 2024, today's only showed 1.  This wasn't too terribly different from what the market expected, but it was slightly more conservative than hoped.   At the very least, traders didn't find anything in the projections nor in Fed Chair Powell's press conference to suggest that the good times should keep on rolling after already having been so good in the morning hours.  Bonds ultimately retraced about half of their gains and several mortgage lenders had announced late-day rate increases by 4pm Eastern Time.   Lenders who didn't bump rates a bit higher this afternoon would need to account for the bond market movement in tomorrow's rate offerings, assuming the bond market doesn't move too much overnight or early tomorrow morning.
Mortgage Rates Barely Budge For 3rd Straight Day, But That Should Change Tomorrow
Today's mortgage rates were fairly close to yesterday's at the average lender for the 3rd business day in a row.  Friday was the last day with any substantial movement when rates spiked following the upbeat jobs report.  Since then, the average lender has only moved by 0.01% on each of the past 2 days. The absence of movement made better sense yesterday.  Rates are based on trading levels in the bond market and bonds ended the day very close to Friday's levels.  It's a bit harder to reconcile today given that bonds did quite well--especially after the auction of 10yr Treasury notes at 1pm Eastern time. Mortgage rates are often discussed against a benchmark of a 10yr Treasury yield.  The two tend to move in the same direction by generally similar amounts.  10yr Treasury yields are 0.07% lower today and the average mortgage rate is only 0.01% lower at the time of this writing.  What's up with that? First off, Treasuries tend to see bigger upsides and downsides when bonds are reacting to a Treasury auction.  Timing is also a factor with the auction happening late in the day.  Several mortgage lenders have already revised their initial rates lower in response, but the improvements won't be captured in our rate index until tomorrow. That brings us to another issue: tomorrow is a potentially crazy day for better or worse.  Well before mortgage lenders publish rates for the day, the Consumer Price Index (CPI) will be released for the month of May.  It has more power than any other economic report to push rates higher or lower, depending on the outcome.  Anticipation of that volatility could also have mortgage lenders feeling less like making any last minute changes.
Mortgage Rates Slightly Higher to Start Pivotal Week
There's been a noticeable uptick in mortgage rate volatility over the past two weeks with a quick spike at the end of May, a nice drop in early June and then another spike last Friday following the jobs report.  Of course everything's relative, so in objective terms, it was roughly a 0.30% round trip for conventional 30yr firxed rates.   Today's move is microscopic by comparison with the average lender only 0.02% higher from Friday.  That's not too surprising considering the lack of actionable data on the calendar for bond traders (bond market movement drives day to day mortgage rate movement). All that is about to change.  The event calendar ramps up quickly from here and Wednesday will be the most important day of the month due to the release of pivotal inflation data and an updated rate announcement and outlook from the Fed.  While there's no chance of a rate cut or hike at this meeting, we should get more clarity on the Fed's interpretation of the very latest trends in inflation.
Rate Optimism Put To The Test by Jobs Report
There's a strong case to be made for the fact that interest rates had a sunny predisposition this week.  In practical terms, that simply meant giving more credence to rate-friendly news and trying harder to overlook unfriendly news. But the predisposition was put to the test in a major way with the week's most significant economic report today.  Nonfarm Payrolls (NFP) is the headline component of the Labor Department's Employment Situation report.  There are many reports that pertain to the jobs market, but this one is infinitely more important than the rest and this time around, NFP came in much higher than expected. While the chart of nonfarm payrolls looks range-bound, and while the job count has been much higher in the past few years, Friday's result of 272k represented an uncommonly large "beat" versus the median forecast of 185k, and a big jump from the previous reading of 165k. A move like this makes it seem like the labor market is too resilient to offer much help to the inflation problem (more jobs, more money, more spending, etc.).  Finally, the bond market's sunny outlook saw a cloud too big to ignore. With that, mortgage rates had their first (and only) motivation of the week to move higher.  But the chart above also illustrates the silver lining.  Specifically, even though rates jumped on Friday, they're not even halfway back to last week's highs, let alone the higher highs seen at the end of April.  Part of the justification for such resilience is that the bond market will defer to inflation data (and the Fed's interpretation of it) above all else in deciding how worried to be about impediments to lower rates.
Mortgage Rates Hold Steady Ahead of Important Economic Data
The outcome of certain economic reports will determine whether the next big move in interest rates is higher or lower.  Two reports are more important than all others in that regard and we'll get both of the them by next Wednesday. Tomorrow's jobs report is the more pressing matter.  It may not be quite as important as next Wednesday's Consumer Price Index (CPI) these days, but it has plenty of power to make or break the day for rates. Today's data was far less consequential by comparison and bonds coasted sideways after a very respectable winning streak over the past 5 business days.  Bonds dictate day to day movement for interest rates.  As such, today's mortgage rates were unsurprisingly right in line with yesterday's. 
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