Mortgage rates stabilized today, but volatility could return
Mortgage rates managed to hold mostly stable Wednesday despite several headwinds that threatened to push them higher.
The first headwind falls into the very broad category of “bond market momentum”. Lenders set their rates each morning based on bond market trading levels, and bonds have generally performed poorly over the past 3 weeks (i.e. pointing to higher rates). In fact, bonds were at their lowest levels for months at one point of the night, but things changed as trade intensified nationally.
The second headwind was the stronger-than-expected result in this morning’s ADP employment report. This data is considered one of many predictors in the all-important jobs report that comes out Friday. While the correlation between the two is random, when ADP’s numbers are significantly different from expectations, the bond market tends to react.
In today’s case, however, bonds had a moderate reaction to ADP and eventually continued to push overnight weakness for several more hours. The net effect is a vote in favor of this week’s current rate range for the time being.
That being said, where ADP may have failed to cause rate drama, Friday’s big jobs report can certainly succeed. This does not mean will invariably cause volatility, but more than any other economic data, it reserves the right to do so.