Weekly Mortgage rate update 10-24-23
Rates made another move up last week, but we start this week a little better.
The bond market has been aggressively re-pricing with yields(interest rates) rising in recent weeks at a steady pace. The past few trading days though, they seem to have hit a wall, perhaps signaling the end of the current run up, or at least a pause.
On Monday, bond yields pulled back causing mortgage rates to improve. The move came after Bill Ackman said, “there is too much risk in the world to remain short bonds at current long-term rates” The thinking is that demand for bonds will increase as a safe haven against increasing geopolitical risk and volatility in stocks.
The last Fed rate hike was in July, at that meeting they removed their recession forecast. Previously markets had priced in a recession ( and the need for the Fed to lower rates) but the marketplace is showing the economy can still grow at higher rates. The July Fed meeting is the date markets started truly pricing in a “higher for longer” scenario because with the recession risk removed, rates will remain elevated. When the economy is strong, long- term rates tend to rise.
The Wall Street Journal points out another position on the matter “Yields have become unmoored from the outlook for Fed policy and are responding to more unpredictable factors, such as souring sentiment about the size of the Federal budget deficit and governments willingness to address it.” I have mentioned this before- Bond prices must rise to meet the demand for our debt. Multiple factors are driving the direction of mortgage rates.
Since we talk about Fed policy a lot when we discuss mortgage rates, I bring these factors up to show that Fed policy is not the only thing that moves mortgage rates, and they don’t always follow exactly on the Fed path.
Remember the Fed has been on pause since July, but mortgage rates are now about 1.5% higher than rates we quoted at the end of July.
Here is the Wall Street Journal article regarding this topic if you want a deeper dive: Bond Rout Drives 10-Year Treasury Yield to 5%
Video Version: https://clipchamp.com/watch/TuxqhyYWfYJ
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