First of all, I’m going to be very specific when it comes to the movement of mortgage rates here. If you just want to know what the rates are doing today compared to yesterday, they are lower. The headline is a reference to intraday price changes. This is the practice of changing rates on business days as market conditions change.
Price changes are common. Rarely does a day go without at least a few people. While we didn’t set a record in that regard today, the average lender ended the day with slightly higher interest rates for the morning’s first offering.
The afternoon price change was counterintuitive given the big event of the day, July’s Consumer Price Index (CPI) release at 8:30 am ET. As far as scheduled reports go, few things in recent months have had the potential to move the market as much as the CPI. This is because the CPI is the more timely of his two major inflation indicators in the US, and inflation has become a bigger issue for his 2022 interest rates.
Interest rates rise as CPI shows inflation clearly lower than expected and much lower than last month in both the overall index and the ‘core’ (excluding more volatile food and energy prices) The pressure was counterintuitive. Notably, July’s headline growth rate he was 0.0% versus +1.3% in June!
If you’re a bond trader or interest rate watcher and had to bet on how bonds/interest rates would react to such a report, you really need a good reason to bet on anything other than falling interest rates. , which is exactly what happened right after this morning’s data. Treasury yields fell, mortgage-backed bonds surged (which is good for the US) mortgage interest rate).
But as the morning progressed, bonds started to move in a different direction. Long-term government bonds actually ended with higher yields by the end of the day. MBS (mortgage-backed securities, which determine mortgage rates) continued to improve significantly, but lost more than half of its morning gains.
Mortgage lenders were revalued for worse and worse as bonds fell, but even after those revaluations rates were in better shape than they were yesterday. still in the low 5% range for a fixed 30-year scenario. Rate estimates range from his mid-4s to his mid-5s, depending on several variables. This is a much wider spread than usual, but not as wide as it might seem by the time you describe the different quoting strategies (the “points” in advance are the biggest differentiator).
So why did interest rates act counter-intuitive? A detailed and responsible answer would be complex and unnecessarily verbose. Simply put (note this is a gross oversimplification), the market was already largely in agreement that inflation had plateaued in the last few months. The next order of business was to respond to economic strengths and weaknesses. Lower inflation allows for greater economic resilience, and economic resilience helps above all to prevent a sharp decline in interest rates. Falling inflation also makes the Fed rate hike less urgent. That sounds good, but it was the austerity accompanying rate hikes that made many investors bet more on a weak economy.