Mortgage rates had a great week last week, ultimately getting very close to the lowest levels since March. One of the main sources of motivation was the market phenomenon known as a “short squeeze.” In not so many words, this means that too many traders were betting on rates moving higher for them to all be right, so the market self-corrected with a quick move back toward lower rates.
The problem with short squeezes is that they don’t serve as a good foundation for sustained low rate momentum–a tendency that’s proving to be true so far this week. In other words, last week’s rate-friendly trend has run its course and markets are now gearing up for tomorrow’s policy announcement from the Fed. In today’s case, that took the form of a moderate move back toward higher rates.