Did mortgage rates just peak, or is the current drop only due to a short-term technical move lower in bonds? We’ve just had a wild 48 hours for the 10-year yield, mortgage rates and economic data. The bond market action might be very confusing, so let me give you my brief take on this.
In the last 48 hours, we got two very hot inflation reports, positive retail sales, rising oil prices and historically low jobless claims. We also had a lot of Fed hawks talk recently about needing more rate hikes. So what gives with the bond market action since the highs of yesterday?
What I believe just happened is what we have talked about for some time now: The 10-year yield hit a very, very key level of 5.35% a few times over the last month. That level has now been tested a few times and held — the bond traders did not want to take it to the next level by selling bonds more. On Wednesday, news about concerns over AI company CoreWeave‘s bad debt financing drove yields lower.
I mean, one hint of bad news from the AI trade and money went into the bonds and really that is it — nothing big materially changed with the economy, but we were just so oversold with bonds that we couldn’t break the key level. Which is very good. If that key level broke, the 10-year yield has the potential to get to 6.41% and mortgage rates would easily be over 8% at that point.
Conclusion
I don’t want to make this any more complicated than what it is: that key technical level didn’t break and bond traders run like herds, so they went the other way on the AI news. I wouldn’t think of this as a big Titanic shift but it’s something to keep an eye on.
As long as the 10-year yield doesn’t close above 5.35% and we can get this conflict over with — then maybe mortgage rates have peaked, but we still have a lot of variables that can push yields higher. For now, enjoy the reprieve.
On the other side, if the 10-year yield can get below 4.70% and the conflict ends, we’ve got something to work with, and some staying power. However, for now, we should just take this as a gift since the key level of 5.35% held under pressure.
https://www.housingwire.com/articles/did-mortgage-rates-just-peak-or-is-this-some-bond-market-madness/
