Well, the wild ride continues for mortgage rates. Last week I wrote that rates weren’t likely to fall over the holiday week, and that turned out to be true. In fact, they ticked up a tiny bit.
This week started out well, with a nice rally in Treasury bonds and mortgage-backed securities driving wholesale rates down a bit on Monday – enough of a drop that lenders were re-pricing for the better over the course of the day. That only happens on days when the market moves fairly significantly.
Today is a different matter, however. The stock market rallied this morning at the opening, taking some money out of the bond market, and reversing course at least for now. I did promise it would be a bumpy ride.
Take a look at the chart above. This has data through yesterday, November 28th. You can see that the rates are trying to level off, as expected. Stocks and bonds often move in opposite directions, however, because money moves back and forth between the markets. Bond yields have an inverse relationship with bond prices, so when stock prices rise, interest rates (including mortgage rates) usually rise too in response.
That relationship has been very steady since the election, with a surprising amount of money moving into the stock market and away from bonds.
Most analysts still agree – with the stock markets at or near record highs and bond yields higher than they have been in a very long time, it still appears that stocks are over-bought and bonds are over-sold. Now that the Thanksgiving holiday is behind us and we have nearly four weeks to Christmas (Can you believe that?) we have about three weeks in which bond yields could work their way unsteadily down, followed by mortgage rates.
All subject to market anomalies, of course.