Mortgage rates had a pretty solid week, drifting lower on almost every day and eventually finishing at their lowest levels in several weeks. The biggest helping hands came from war-related headlines, falling oil prices, and a jobs report that decided to show up on Friday and add a little extra drama.
As usual, mortgage rates are heavily influenced by bonds, and the bond market has become surprisingly easy to summarize: oil goes up, rates generally go up. Oil goes down, rates generally go down. It’s not quite a scientific law, but lately it has been behaving suspiciously like one.
Of course, there are still the usual suspects. Big economic reports, Federal Reserve commentary, and other market-moving events can all crash the party and change the direction of rates.
This week, several developments related to Iran were viewed positively by the markets, either because the pace of fighting appeared to be changing or because there was renewed hope that the Strait of Hormuz could eventually reopen. Oil prices responded by moving lower, and bond yields — which are closely tied to mortgage rates — generally followed.
The chart below shows 10-year Treasury yields and oil futures throughout the week, with the most notable movement highlighted.
There was one small plot twist on Thursday. The 10-year yield moved higher thanks to a large corporate bond announcement. When a major borrower comes to the bond market looking for a lot of money, that means more bonds are being supplied. More supply can push bond prices lower, which in turn pushes yields higher. And, as mortgage rate watchers know all too well, higher yields generally aren’t exactly what we’re hoping to see.
Friday, however, brought the much bigger move.
Bond yields dropped sharply after the release of the latest monthly jobs report, which showed much weaker job creation than expected. Nonfarm payrolls came in at -23,000, compared with expectations for +80,000.
Normally, a number like that would be enough to send rates tumbling. And while rates did improve, there was an interesting wrinkle in the report: the unemployment rate actually fell by 0.1% from the previous month.
Wait… fewer jobs, but lower unemployment? What kind of economic math is this?
Fortunately, there’s a perfectly reasonable explanation.
The unemployment rate is calculated based on the number of people who consider themselves part of the labor force. If someone responds to a survey saying they have a job, they’re counted as employed. The official job count, meanwhile, is based on surveys of businesses.
So it’s possible for businesses to report fewer jobs while the unemployment rate still falls if fewer people are actively participating in the job market. In other words, the two numbers aren’t necessarily contradicting each other — they’re simply looking at the labor market from different angles.
And despite all the statistical gymnastics, the bottom line was still good news for rates.
Mortgage rates improved from Thursday to Friday, ultimately ending the week at their lowest levels since July 20th.
The only catch is that the weekly, survey-based rate indices haven’t quite caught up with the improvement yet. Daily rate tracking from Mortgage News Daily is already showing the move, while the weekly surveys are still playing catch-up.
So, for once, the week ended with a little something for mortgage borrowers to smile about: lower oil, lower bond yields, a weaker jobs report, and rates reaching their best levels in weeks.
Not exactly a bad way to wrap things up.
