Mortgage rates moved lower today even though the broader bond market suggested they should have remained flat or higher. In several of this week's previous articles, we've discussed the volatility that's been wreaking havoc on the world of mortgage rate setting for lenders. Simply put, when the moves get bigger and when the direction changes more frequently, mortgage rates take extra damage relative to Treasury yields (a risk-free benchmark for most any other rate in the US).
Conversely, when rampant volatility begins to ebb, lenders are able to repair some of that damage. The steadier the broader bond market can remain, the more we may see mortgage rates fall, even if outright trading levels aren't suggesting as much of an improvement. More simply put, the 10yr Treasury yield is at 1.738% at the moment I'm writing this. If it were to stay in a range between 1.70% and 1.75% all next week and end at 1.738% again, mortgage rates would be noticeably lower. These dynamics don't always apply, but they apply doubly when mortgages are recovering from big volatility after a big move lower.