Tag: #fidelityhomegroup

Mortgage rates were slightly lower today as the bond market improved for the 2nd straight day.  When bonds prices move higher, bond yields (or rates) move lower, all other things being equal.  In the current case, bonds were generally cautious heading into yesterday’s reading of the minutes from the most recent Fed meeting (read more), but have been bouncing back ever since.  

All that having been said, the movement has been fairly gradual.  The average mortgage borrower may not even see any different between yesterday and today’s rates.  That’s because mortgage lenders typically offer rates in 0.125% increments, and it takes quite a bit more movement in the bond market for rates to change that much. 

Mortgage rates haven’t been skyrocketing, by any means, but they have been moving up in fits and starts over the past 2 weeks.  Today was just another page in that story despite a relatively friendly reaction to the Fed Minutes.

What are the Fed Minutes?  Well may you ask!  If you’re familiar with the notion of “meeting minutes,” that’s basically what we’re dealing with.  In the Fed’s case, the minutes offer a robust recap of the discussion that takes place during the Fed policy meetings.  These can be extraordinarily important events for financial markets–especially the bond side of the market (bonds dictate interest rates, including those for mortgages). 

Even though the most recent Fed meeting was 3 weeks ago, traders are nonetheless anxious for any clues about future Fed decisions.  In today’s case, the anxiety played out in the form of bond market weakness ahead of the Minutes (weaker bonds imply higher rates) followed by a recovery after the Minutes proved to be fairly boring.

Mortgage rates experienced an uptick in volatility last week as the broader bond market was hit with a big dose of new supply.  In other words, between a set of scheduled Treasury auctions and a surge in corporate bond issuance, there were lots of new bonds looking for buyers.  More supply means bonds have to offer higher yields (aka “rates”) in order to attract buyers.  Mortgage rates moved higher as a result, but only in the first half of the week.

Once the market worked through the supply, renewed covid fears and geopolitical risks combined to tip the scales back in favor of bond buyers (investors often seek out bonds as a safe haven amid uncertainty and/or economic weakness).  More buyers mean lower rates, all other things being equal.  The good times kept rolling up until Monday morning.  The bond market has leveled off since then, but is doing a fairly good job holding in this lower range.