Today's Mortgage Interest Rate News

The bond market is clearly waking up from the holiday slowdown. By midmorning today, trading activity had already surpassed the volume seen on several recent full trading days, showing that investors are back and paying attention again.

Over the past three weeks, bonds stayed locked in a narrow range. The 10-year Treasury yield moved back and forth between about 4.10 and 4.20 percent without making a meaningful move in either direction. That kind of sideways trading often happens when markets are quiet and waiting for fresh information.

Now that normal participation has returned, the chances of a breakout from that range are increasing. The most important event this week is Friday’s jobs report, which often has a strong influence on bond prices and mortgage rates. Strong job growth can push bond prices down and cause yields and mortgage rates to rise. Weaker job data can lift bond prices and help yields and mortgage rates move lower.

There are also other reports to watch before Friday. Wednesday brings the JOLTS and ISM Services reports, which provide insight into job openings and the health of the service sector. These reports can influence how investors feel about the economy, even if their impact is usually smaller than the main jobs report.

So far today, the ISM Manufacturing report came in slightly weaker than expected, but it has not caused much movement in the bond market.

For homebuyers, the key takeaway is that markets are back to reacting more normally. With higher trading activity and several important reports ahead, mortgage rates may be more likely to move out of their recent holding pattern this week.

Over the past several days, the bond market has been operating under typical holiday conditions. Fewer traders are active, and trading volume is much lighter than normal. When that happens, markets can move more sharply and less predictably than they would during a normal week.

That is exactly what we are seeing this morning. The latest GDP report showed the economy growing much faster than expected, and bond prices fell quickly in response. When bond prices fall, yields rise, which puts upward pressure on mortgage rates.

Even though the move looks dramatic, the context matters. The size of the bond market reaction is much larger than what we usually see after major reports like the jobs report or inflation data. However, the amount of trading behind the move is much smaller. In simple terms, prices are moving a lot even though relatively few trades are taking place.

For homebuyers, this is an important reminder. During holiday periods, market moves can look more meaningful than they really are. Strong economic data can still push bond prices down and rates up, but low trading activity can exaggerate those moves. Once normal trading resumes, markets often settle back into a more stable pattern.

This morning brought encouraging news on inflation, which is closely watched by the bond market and directly affects mortgage rates. Core annual inflation came in at 2.6 percent, well below the expected 3.0 percent and down from the previous reading of 3.0 percent. This is the lowest inflation level seen in this cycle.

Lower inflation is generally positive for bonds because it makes fixed interest payments more attractive. When investors buy more bonds, bond prices rise and yields fall, which helps create a better environment for mortgage rates.

Even with this strong inflation news, the bond market’s reaction has been measured rather than dramatic. Bonds are improving, but not as much as the inflation data alone might suggest. Some investors may be cautious due to concerns about how complete the data is following recent disruptions, or they may be taking a more conservative approach as the year comes to an end.

Regardless of the market’s initial reaction, the inflation report itself was better than anyone expected and even stronger than economists predicted. That makes it a clear positive for bond prices and a helpful development for homebuyers watching mortgage rates.

It is also worth noting that there is no month-to-month inflation comparison in this report because the October CPI data was not available.

Wednesday is shaping up to be a very quiet day for the bond market. With the year winding down, there are fewer active trading days left, and there are no major economic reports scheduled to move markets in a meaningful way.

That changes on Thursday with the release of the Consumer Price Index report. This inflation report is the last major piece of economic data before the early January jobs report. After a relatively uneventful jobs report earlier this week, CPI has become the main focus for investors looking for direction.

CPI measures how quickly prices are rising or slowing across the economy. This matters for bonds because inflation affects how attractive bonds are compared to other investments. If inflation appears to be easing, bond prices often rise, which pushes yields and mortgage rates lower. If inflation looks stronger, bond prices can fall, causing yields and mortgage rates to move higher.

For now, bond yields are simply moving within a familiar range. As long as yields stay between roughly 4.10 and 4.20 percent, daily market movement is unlikely to have much meaning for mortgage rates. A modest improvement this morning brought yields closer to the lower end of that range.

For homebuyers, the key takeaway is that today’s calm is likely temporary. Thursday’s inflation data has the potential to create more noticeable movement in bond prices and mortgage rates, making it the most important event of the week to watch.

This week brings the return of more up-to-date economic reports from the Bureau of Labor Statistics, which produces two of the most closely watched reports in the bond market. These reports often play a major role in how mortgage rates move.

The first is the monthly jobs report, scheduled for Tuesday. This report shows how many jobs were added or lost and provides insight into the overall strength of the labor market. At the same time, October’s retail sales data will be released, offering a look at how confident consumers are and how much they are spending.

On Thursday, the Consumer Price Index report will be released. This report tracks changes in prices across the economy and is one of the most important measures of inflation.

For homebuyers, these reports matter because they influence bond prices. When economic data shows strength, investors often favor stocks. That shift tends to push bond prices down, which causes yields and mortgage rates to move higher. When the data shows weakness or cooling conditions, investors are more likely to buy bonds, pushing bond prices up and allowing yields and mortgage rates to move lower.

With several major reports packed into a short window, this week’s data could help set the tone for bond prices and mortgage rates into the second week of January.

The Week Ahead

Here are the key economic reports and events over the next seven days that could influence bond prices and mortgage rates, along with a plain-English explanation of why they matter:

Jobs Report and Retail Sales – Tuesday
The jobs report shows how many people are working, while retail sales reveal how much consumers are spending.

• Stronger results: Suggest the economy is running hot. Stocks often benefit, bond prices tend to fall, and yields and mortgage rates move higher.
• Weaker results: Suggest slower economic activity. Bond prices often rise, yields fall, and mortgage rates can improve.

Consumer Price Index (CPI) – Thursday
This report tracks changes in prices paid by consumers and helps show whether inflation is easing or heating up.

• Higher inflation: Often pressures bond prices lower, which pushes yields and mortgage rates higher.
• Lower inflation: Typically helps bond prices rise, allowing yields and mortgage rates to move lower.

Weekly Jobless Claims – Thursday
This report measures how many people recently applied for unemployment benefits.

• Fewer claims: Point to a strong job market, which can pull money out of bonds, lower bond prices, and raise yields and mortgage rates.
• More claims: Suggest a cooling labor market, which often supports higher bond prices and lower yields and mortgage rates.

Market Positioning and Investor Reaction – All Week
Beyond the data itself, how investors react can matter just as much.

• If investors move toward stocks: Bond prices tend to fall and rates rise.
• If investors move toward bonds: Bond prices rise and rates fall.

For homebuyers, this week has the potential to bring more noticeable movement in mortgage rates, making it an important one to watch closely.

Today’s bond market activity was fairly straightforward. Most traders had already adjusted their positions ahead of the upcoming Federal Reserve announcement, so the main focus this morning was the JOLTS report, which tracks job openings and worker turnover.

Trading volume jumped sharply when the report came out, showing that investors were paying close attention. The number of job openings came in higher than expected, which points to a stronger labor market. Strong labor data often leads investors to shift money toward the stock market and away from bonds. When money leaves the bond market, bond prices fall and yields rise, which can push mortgage rates higher.

There was one positive detail for rates in the report. The “quits rate,” which measures how many workers voluntarily leave their jobs, dropped to the lowest level of the current cycle. A lower quits rate suggests that workers feel less confident about job-hopping, which can be a sign of cooling in the labor market. Cooling economic trends tend to support higher bond prices and lower yields.

Even with that helpful detail, the overall effect of the report was still negative for bonds. Prices moved lower, yields moved higher, and that puts some upward pressure on mortgage rates. The move was not as sharp as it could have been, but it still leaned in the wrong direction for homebuyers hoping for lower rates.