Trading levels in the bond market directly impact the rates that mortgage lenders can offer. This is why rates moved so much lower after last week's news regarding planned purchases of $200bln in mortgage backed bonds.  But bonds aren't the only input for rates, and those other inputs can make for days like today where bonds are noticeably better while mortgage rates refuse to follow. Those other inputs aren't as easy to observe and quantify as the objective trading levels in the bond market, but in the current case, we can assume that at least some of the explanation has to do with mortgage lenders quickly becoming too busy to handle more volume. "Busy" isn't necessarily the right word, but in this case, it's a catch-all term for the side effects of rapidly originating a much higher volume of new loans. One aspect has to do with the flow of funding. Lenders don't have unlimited cash to accept new lock commitments.  As they approach those limits, they will raise rates (or not lower them as much as their peers) to deter new business. A slightly more esoteric aspect has to do with deterring borrowers who recently acquired new mortgages from refinancing. Early payoffs (which mostly occur via refinancing when rates unexpectedly fall) cost lenders money because, on average, lenders pay more than the principal amount to originate a loan.  They then rely on earning interest to offset that expense. An early payoff means they won't be able to collect that interest. As such, they have an incentive to avoid setting rates at low enough levels to entice recently minted mortgages from refi'ing. 

According to our chart of MND's mortgage rate index, 30yr fixed rates bottomed at 6.01% yesterday, but that's because the chart logs the day's latest entry.  On Friday, until late in the day, the chart showed a rate of 5.99%. It was only after several lenders raised rates in the afternoon that the index moved up to 6.06%. Today's rates ended up just a hair higher than that at 6.07%. Most of the underlying market weakness that accounts for today's jump occurred yesterday afternoon. Lenders who raised rates yesterday afternoon offered roughly comparable rates this morning.  Things might have ended up worse today had it not been for a reasonably well-received CPI report (Consumer Price Index). This important data showed inflation remaining in check in December, with the most closely-watched metrics coming in just below the median forecast.  Lower inflation is good for rates, all else equal, but inflation isn't falling fast enough to have a big impact in the short term. In today's case, it did more to help the bond market avoid losing ground than it did to spark a new rally. [thirtyyearmortgagerates]

Mortgage rates are either higher or lower today, depending on the lender in question. Some lenders raised rates on Friday afternoon in response to weakness in the bond market (lenders set rates based on the trading levels of MBS, the bonds that underlie the mortgage market). Those lenders are actually slightly lower today. Lenders who didn't raise rates on Friday afternoon are slightly higher today. In all cases, apart from Friday morning, today's rates remain well below anything seen for nearly 3 years. This is notable considering 10yr are near 4 month highs and more than 0.20% higher than the lower end of the range during that time. One reason for mortgage rates outperforming the 10yr Treasury is the fact that the 10yr isn't always the best indicator for mortgages. In recent years, a 5yr Treasury has behaved more like mortgage rates in terms of day to day movement.  An even bigger reason for mortgage outperformance is last week's announcement regarding Fannie/Freddie purchases of MBS.  This is the news that sent rates surging lower on Friday.  The market is continuing to hone in on a new trading range for MBS today, but the bulk of the initial volatility seems to have passed.

On a week where the mortgage market was most likely to experience volatility due to Friday's jobs report, Thursday afternoon's surprise announcement of $200bln in GSE MBS (mortgage-backed securities) buying stole the show. This was already juicing the underlying MBS market yesterday afternoon, but traders took the surge to the next level this morning. This matters because MBS dictate mortgage rates.  When MBS are rising/improving/surging/etc., it implies lower rates. MBS had improved so much this morning that the average lender released their best rate sheet since Feb 2, 2023--the lowest level since September 2022.   The caveat is that MBS experienced significant volatility throughout the day and that volatility is likely to continue. As of this afternoon, at least one lender has already bumped rates back up a bit.  If more lenders follow suit, the end of day average rate could move up, but it would still likely be the lowest in at least a year.  Bottom line: the market didn't have much of a reaction at all to the jobs report. The MBS market continues sorting out a huge reaction to the GSE purchase news. Rates are definitely quite a bit lower. It remains to be seen how much lower they'll be when the initial volatility settles down--something that will probably require more clarity on the specifics of the MBS buying plan.

Mortgage rates were just a hair higher for the average lender on Thursday. The underlying bond market lost some ground following a stronger weekly Jobless Claims report and in sympathy with global bond market weakness overnight.  Because rates are based on bonds, when bonds are weaker, rates move higher. There are many different economic reports that deal with the jobs market, but none more important than the Employment Situation released by the Bureau of Labor Statistics--the one typically referred to simply as "the jobs report."  This month's jobs report will be released at 8:30am ET on Friday morning. Mortgage lenders don't set their rates for the day until the 9am hour at the earliest, and that's plenty of time for the data to send the bond market on a wild ride. If the jobs report is stronger than expected, rates will likely be higher, and vice versa. One final note: any economic report with high volatility potential can also have a limited impact. It all depends on how the data comes in. All we can know ahead of time is that the range of potential movement in rates is higher after reports like this.