Mortgage rates were only modestly higher on Friday, but because of the narrow prevailing range and previous increases this week, that brings us right in line with 2-month highs. Bonds (which dictate rates) began the day with promise. There was heavy buying (good for rates) in the 7am hour. This coincided with stocks challenging their lowest levels in weeks.  But both stocks and bonds bounced back in the 9am hour. Bonds ultimately erased all of the morning's gains and, thus, the hope for today's mortgage rates to be lower than yesterday's. 

Mortgage rates rose somewhat sharply following the late October Fed meeting but have been in a relatively narrow range so far in November.  The range is so narrow, in fact, that yesterday's average rate was at the bottom of that range while today's rate is closer to the highs. Given the minimal overall movement, there's no compelling need to account for underlying market motivations. To be sure, there was no new economic data that caused weakness in the underlying bond market. That leaves only the reopening of the government as a scapegoat. Several days ago, when the end of the shutdown came into focus, we cautioned that it was more likely to put slight upward pressure on rates whenever it was confirmed. This is consistent with the movement seen today. More meaningful momentum will depend on the economic data that is once again in the cards now that government agencies are open. The only caveat is that we're still waiting on updated release schedules for those reports.

Mortgage rates are based on bond market movement and bonds are much stronger today compared to Monday. Although bonds were closed yesterday for the Veterans Day holiday, there was an important piece of economic data that suggested lower rates today. The data in question was the new weekly payroll count from ADP. Whereas October's monthly data (which came out last week) suggested 42k new jobs created, yesterday's weekly data showed an 11k DECREASE in the payroll count.  Decreases are uncommon outside recessions and recessions tend to push interest rates lower. The average lender moved down to the lowest levels since October 31st, but just barely. The typical correlation between bonds and mortgages suggested a slightly bigger move.

Mortgage rates went into the weekend with a small cushion thanks to movement in the bond market on Friday. Specifically, bonds improved after mortgage rates came out for the day. If the improvement had been sharper, mortgage lenders likely would have made a mid-day adjustment to slightly lower levels. The implication was that rates would have been slightly lower this morning if bonds managed to hold the same levels over the weekend. Unfortunately, bonds lost enough ground to overshadow Friday's cushion, just slightly. The net effect is an average top-tier 30yr fixed rate that is 0.02% higher versus Friday morning--a minimal change considering the day-over-day losses in the bond market. With that, the average lender remains well inside the the 0.10 range that's been in place since October 29th.  Bond markets are closed tomorrow for Veterans Day. When markets reopen on Wednesday, the prospects for ending the government shutdown may be coming into clearer view and that could cause enough market volatility to spill over into rates. If today's trading was any clue, a "reopening" event is more likely to put upward pressure on rates, but today's rate increase could already be reflecting those expectations. 

Wednesday's mortgage rates were the highest in roughly a month and very close to the highest levels in 2 months.  This followed stronger economic data on that same morning. Rates moved back down yesterday after separate econ data told a different story. Now on Friday, it's a mixed bag. The underlying bond market was slightly weaker to start the day, and that meant rates started out modestly higher. But the last economic data of the week showed lower-than-expected consumer sentiment. Bonds improved as a result, but not enough for the average lender to go to the trouble of adjusting their mortgage rate offerings. The implication is that Monday's rates would be back in line with yesterday's if the bond market were to hold steady over the weekend. Keep in mind, that's never a guarantee. The point of sharing the info is simply to relay the fact that rates could endure a bit of bond market weakness over the weekend without being any higher than they are today.