It was undoubtedly an extremely volatile week for the financial markets and it includes the US bond market. For example, the poster for the American bond market, the 10 -year -old treasure, has seen its highest increase for one week since 1981.
As we often discuss, mortgage rates are based on obligations that share many similarities with American treasury bills, it is therefore not surprising to see chaos on this market and a concomitant increase in mortgage rates. In general, mortgage rates and bond yields are exceptionally well correlated (after all, a “yield” is the rate paid by an obligation).
As with a large part of this week’s drama, today’s decision did not have a separate motivation. The weakness testifies to a broad change with regard to the demand of the American Treasury. Digging more deeply would require esoteric explanations of underlying market structures. The main thing is that investors are shaken by rapid policy changes, as well as an uncertainty about how these changes will ultimately be settled and will affect the market.
As for the mortgage market, we have certainly experienced individual days and weeks, but the increase in rates is definitively classified on the rapid side of the spectrum. The average lender has increased by approximately an eighth percent today, the closest typical rate being 7.125% for a level of level level level level. It’s about half a hundred more than last Friday, which has made it the biggest weekly leap since the beginning of 2022.
