It’s not a secret Mortgage rates had a tough month in March and a tough year in general. The average lender raised the 30-year fixed rate by around half a percent in February and March alone. But April turned out to be April very different kind of month so far. Over the past two weeks, rates have fallen by almost a quarter point on average. Today was a crucial part of the improvement as lenders reacted in waves to an exceptionally strong day for the underlying bond market (bonds are the main driver of daily interest rate fluctuations).
One of the most interesting Today’s move was for the bond market to improve after a series of much stronger economic data. This is interesting because the fundamental reaction function in the bond market is exactly the opposite! In other words, stronger data tends to damage bonds and raise interest rates.
So why break with tradition? That is a hotly debated Topic among traders and analysts at the moment. There are several fairly arcane justifications and a few options that are more basic. One thought is that the markets were ready to see even better data as the stimulus payments showed up on the retail sales report. The other fundamental consideration (albeit one that is underpinned by complex nuts and bolts) is that bonds have had such a tough stand in recent months that they had to take a little break in April.
Whatever the real combination of motivations, the results are a welcome change. The results are also an excellent opportunity for that should not be taken for granted if you are the person who recently lamented the 2021 rate hike. There really is no telling how long this type of “welcome respite” will last, and it is still easier to advocate gradual upward pressure on interest rates by and large.