Mortgage rates are primarily dependent on trading levels in the bond market, and in June bonds experienced (or suffered) an interesting mix of volatility and stability. The yield on US Treasuries (which has a strong correlation with mortgage rates) fell sharply earlier in the month. Mortgages have not advanced as much, but have nevertheless made their way to their best levels from the end of February.
Thereafter, the Fed’s June 16 statement was the next major source of instability. It pushed the bets fast higher and they gradually recovering since then. Today is adding another almost imperceptible brick to that wall, but that’s enough to push the 30-year average fixed rate to its lowest level since the morning before the Fed announced. Some see these levels as a sign that it is time to be more defensive when it comes to future rate expectations, which is a good way to look at things, given that the broader bond market is struggling to rally well above current levels.
Others see a lack of improvement combined with a similar lack of deterioration and conclude that the market biding its time before making the next big decision. As much as the market is willing to make big bets in the usually slower time of the year for trading, this Friday’s jobs report offers the best chance for such decisions. In this sense, the lower volatility of the last few trading sessions may just be the calm before the storm.