Everything’s Relative, And Rates Had a Relatively Good Week
While it’s possible to accuse mortgage rates of experiencing volatility over the past few days, this week was exceptionally calm compared to last week. So “everything’s relative,” and relatively speaking, that’s a win. Here’s a snapshot of the action as told by 10yr Treasury yields, which tend to be moving in the same direction as mortgage rates: As the chart points out, Thursday’s 30yr bond auction brought this week’s only instance of excess volatility. This refers to The Treasury Department’s regularly scheduled auctions of US debt–some of the only interesting items on this week’s event calendar as far as rates were concerned. In general, Treasuries are the tour guides for the bonds that drive mortgage rates (MBS or mortgage-backed securities). They tend to hang out closer to the tour bus while MBS go off in search of adventure, but everyone is generally moving to the same places at the same time. In other words, a big, volatile jump in Treasury yields often suggests the same for mortgage rates. Fortunately, this particular jump wasn’t that big, and the 30yr Treasury bond is less correlated with mortgage rates than 5 or 10yr Treasuries. The result was only a modest increase in rates on Thursday and not one that erased too much of the recent improvements. Of course we should remember that everything’s relative… The chart above is not intended to rain on any parades, but merely to put them in context. It shows 3 previous instances of rates appearing to top out and push back against long term highs only to be persistently dragged higher. All that to say: it’s promising to see rates mostly holding last week’s improvement, but as far as long journeys go, it’s best viewed a solid first few steps.