This past week, interest rates held steady during a quieter news cycle. Let’s break down what went down and take a look at what’s coming next.
“Rock steady, baby, rock steady, woo!” – Rock Steady by Aretha Franklin
Oil Sputters
Oil and mortgage rates tend to move in sync. When oil prices drop, rates often follow, and that’s exactly what happened earlier this week. On Tuesday, oil had its biggest one-day drop in a while, driven by news that Israel wasn’t going to attack Iranian oil facilities. Plus, OPEC projected less global demand for oil. Both stories put pressure on oil prices, which helped long-term rates improve a bit.
Inflation Around the Globe
Globally, inflation continues to ease, which is great news for bonds and rates. Recent reports from Canada, the UK, and Europe showed lower-than-expected inflation. As inflation falls worldwide, it puts downward pressure on global interest rates, which also helps U.S. rates.
Retail Sales Not “Real” Good
Retail sales came in higher than expected for the month, pushing the year-over-year number up to 1.7%. That sounds good on paper, but when you adjust for inflation, or look at “Real” Retail Sales, they were actually negative. Basically, people aren’t buying more—they’re just paying more. Real Retail Sales peaked in April 2021, and when they flatten out for a while, like now, it’s historically been a precursor to a recession. Time will tell.
4.00%
The 10-year Note yield, which tends to follow the same patterns as mortgage rates, improved a bit from last week’s highs. It touched 4.10% a few times but dropped to a low of 4.00% after the oil news. Right now, 4.10% is acting as resistance, keeping rates from rising further, and 4.00% is the support level preventing rates from dropping. Whichever way the 10-year Note breaks, mortgage rates are likely to follow.
Bottom line: Mortgage rates paused their climb this past week, which feels like a win after the recent spikes. The next big move will probably come from key news like inflation, jobs data, or even the upcoming election.
Looking Ahead
Next week’s economic calendar is light, with no major data releases touching on inflation or the labor market—two key drivers for the Fed. We will hear from some Fed speakers making their final comments before entering the “quiet period” ahead of the next big Fed meeting in a few weeks.
Economic Calendar
Mortgage bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 5.0% coupon, where currently closed loans are being packaged. As prices move higher, rates decline, and vice versa.
If you look at the right side of the chart, you can see how prices and rates have moved sideways after a sharp decline.
Chart: Fannie Mae Mortgage Bond (Friday October 18, 2024)
Economic Calendar for the Week of October 21 – 25
