Market Update: Bond Market Strength Pushes Rates Lower After a Week of Jumps

Blog posted On October 10, 2023

Last week, rates trended higher after various employment reports exceeded jobs growth expectations. Strong jobs market = strong economy = weaker bond market = higher rates. However, the events over the weekend have reversed the trend.

“Friday brought a sharp rise to the highest levels in 23 years,” wrote Matthew Graham of Mortgage News Daily. “The most obvious culprit was the big monthly jobs report which showed job creation (nonfarm payrolls) increasing far faster than economists predicted. It was one of only a handful of months in the past few years that came in higher than the 12-month trailing average.”

The Federal Open Market Committee (FOMC) has continued to state that the trajectory of its benchmark interest rate will be dependent on economic data – specifically jobs data and inflation. Not just one ‘lower-than-expected’ report either. They’re looking for a consistent trend lower over the course of many months of report releases. However, while waiting for data to decline, there are other factors that affect rates as well. Geopolitical events are a big one.

Remember the initial news of the Russia-Ukraine events? Events like this create uncertainty in the markets, causing a strength in safety (bonds). A stronger bond market typically means lower rates. So, amidst the unfolding conflict between Israel and Hamas, rates are trending lower. 

We will continue monitoring how the unfolding situation affects the market and keep you informed. If you have any questions or concerns about the state of the markets and what it means for you, let us know.


Sources: Bloomberg, Mortgages News Daily, Mortgage News Daily