Mortgage rates had a great week latest Week and is finally getting very close to the lowest levels since March. One of the main sources of motivation was the market phenomenon known as the “short squeeze”. In not so many words, this means that too many traders bet higher than they were all right, so the market corrected itself with a quick move back toward lower prices.
The problem What about short squeeze is that they are not a good foundation for sustained momentum when interest rates are low – a trend that has so far proven true in this week. In other words, last week’s pro-interest rate trend has taken its course and markets are now preparing for tomorrow’s monetary policy announcement by the Fed. In today’s case, that was a moderate move backwards higher Rates.
While the Fed not finished yet Adjusting their policy rate or changing their schedule for buying bonds can help them express the likelihood of these prospects in the future. There are several ways to do this, from the announcement itself to the press conference with Fed Chairman Powell that takes place 30 minutes after the announcement at 2 p.m. ET. There’s also the updated economic forecast, which includes Fed members’ individual views on when the first rate hike will come (as well as rates at the end of the next few years).
Bonds (which are driving rates) tend to react with greater volatility to these Fed meetings (the 4 out of 8 that include the economic outlook). There is no way of knowing whether that reaction will be good or bad for rates – only that brings tomorrow afternoon increased chances of a bigger move.