10-year yields may have hit their lowest levels in months in the wee hours of the morning and people may still perceive a little too much of a correlation between 10-year yields and mortgage rates, but the latter have failed. not quite the same success. To be fair, the treasury bills have ended losing as the day wore on, but even so, they are closer to their recent lows than mortgage rates.
The mortgage market is facing many of his own obstacles when it comes to this competition. The first concerns the yield curve (that is, the different rates of return on Treasury securities at variable horizons). Rather than betting on the outright levels of US Treasuries, traders often bet on the relationship between two levels. If they see long-term rates moving closer to short-term rates, it’s called “flattening“(because the yield curve would have a flatter shape).
Flatteners were all the rage after the Fed’s announcement last week, and they tend to be better news for 10-year Treasuries than mortgage rates. Today has in fact brought the reverse business model (a stiffener), and indeed the mortgage market has done better than 10-year T-bills, but in today’s case, that just means mortgage rates haven’t risen as much as T-bills.
Even if the underlying mortgage bond market scores a victory in the coming days, it may not translate substantial improvements in the prices offered to consumers. The reason? Volatility! The faster and more the fluctuations between highs and lows, the more expensive it becomes to take out a mortgage. This expense is felt in the form of slightly higher rates, all other things being equal.
Finally, there is just a risk that the global bond market is moving into a sideways trend pending more actionable information in the months to come. If so, it is easier to say that the current levels are closer to the lower end of the probable range. This means a slightly greater risk of upward pressure compared to downside opportunities for rates.
All that being said, there is certainly not to predict the future of the markets. There are reasons why rates could fall further. But if they do, it would be slow.
As for today, it was not the end of the world. A few lenders were in fact compliant with last week’s rate offers, based on the time of day of their last rate schedule on Friday and their new rate schedules today. On average, however, conventional 30-year fixed rates are just a hair’s breadth higher.