Mortgage rates have fallen today after starting the week by jumping noticeably higher yesterday. Today’s gains are due to worries about global growth at the start of the trading session and a strong 10-year Treasury auction during domestic market hours. Mortgage rates this morning weren’t too better than yesterday, but several lenders offered improvements mid-day after the Treasury auction. Lenders that have held their own would likely improve tomorrow morning, unless the overnight market drama wipes out today’s gains.
Why Are Treasury Auctions Important For Mortgage Rates? Treasury bills and MBS (mortgage backed securities – the bonds that most directly affect mortgage rates) are both part of the bond market. They correlate quite well for a variety of reasons (not the least of which is that Treasuries are the risk-free starting point against which every dollar-denominated bond investment is measured). As such, when Treasuries have a good day, MBS (and therefore mortgage rates) tend to have at least a decent day. Today was no exception.
All of the above being said, we are talking about very small movements overall. The average lender is still offering the same rates as yesterday, but with modest improvements in upfront costs (i.e.
tomorrow brings several important developments, with the European Central Bank (ECB) issuing a periodic policy update. Just as Treasury considerations can spill over into the mortgage world, global central bank considerations (the kind that affect the European bond market) can spill over into the US bond market. National hours result in a final Treasury auction for the week at 1 p.m. ET.