Mortgage rates have been bouncing around by leaps and bounds in a wide, sideways range over the past 2 weeks. The upper boundary of that range happens to be the highest level in 23 years. The lower boundary doesn’t really matter in light of the upper boundary. All of the above is a logical byproduct of the environment. Mortgage rates are based on bonds and bonds have some big decisions and revelations ahead. Like mortgages, Treasury yields have risen to long-term highs, but have shown signs of indecision with plenty of volatility in the process. Bonds take cues from several sources. Three of the most important are economic data, Fed policy, and Treasury issuance. Next week brings an abundance of all three with a new Fed announcement, a new announcement of Treasury borrowing needs, and the most action-packed week of economic data of the month (the first week of the month typically is). To a lesser extent, “technicals” can inform some trading decisions. One of the simplest examples of technical trading cues would be 10yr Treasury yields hitting 5% and treating it as a ceiling simply because 5% is a big round number that is quite high relative to where most investors thought it would be a few weeks ago (and especially a few months ago). In other words, bonds (which is just another word for “rates”) are staring down a collection of their biggest considerations all at a time when certain economic undercurrents suggest two of those considerations (the data and the Fed) could be shifting gears in the near future. All this is occurring against the backdrop of the technical challenge of 5% in 10yr yields and the big, sideways volatility that has ensued.
