The bond market is closed today for Veterans Day, but with tech stocks rallying, the pressure is back on mortgage rates.
Yesterday already did a fair amount of damage so a breather is probably welcomed here.
The 30-year fixed jumped about an eighth of a point on the day back to around 7.375% after falling to 7.125% last week.
We had been making progress toward a possible 6-handle, but then we got both a hot jobs report and a hot inflation report.
And with tech stocks hot again, another headwind has presented itself.
Tech Selloff No Longer a Tailwind for Mortgage Rates
While the bond market is shut, stocks are trading and the tech-heavy Nasdaq is rallying on the back of CoreWeave earnings.
The stock is up nearly 25% today thanks an earnings beat and a positive outlook.
While it’s just one stock, it was the poster child for the tech selloff that helped mortgage rates over the past month.
Now it seems to be doing the opposite, and if the bond market were open, we’d likely be seeing mortgage rates add to the damage from yesterday.
So I suppose be happy we’re getting a midweek break, but if this trend holds and the AI trade is back, mortgage rates could march right back to recent highs.
Ultimately, the stock selloff was the only thing working for mortgage rates lately.
The flight to safety was the difference maker that pushed 30-year fixed mortgage rates closer to the 6s than the 8s.
But if that proves short-lived and we see risk-on trade again through the end of the year, perhaps with a Santa Claus rally, mortgage rates could suffer.
[Use my mortgage rate calculator to see how different rates stack up payment and interest-wise.]
Why the Bellwether 10-Year Yield Jumped Back to 5%
As noted yesterday, a hot CPI report is what pushed 10-year bond yields back to 5%, and in the process mortgage rates.
Fed Governor Waller added fuel to the flames by saying a 0.3% core reading would make him inclined to support a half-point hike in December, and lo and behold, core came in at 0.3%.
Fed Governor Bowman then added that there’s still work to do on inflation, which didn’t help matters.
Of course, most still just expect a 25-basis point Fed rate hike next month, but the pressure is certainly back on to tame inflation.
Given 5% is a key threshold, it’s something to watch to see if it’s a line in the sand and yields move higher again after getting relief due to the AI trade unwinding.
Especially if AI stocks heat up again and finish the year strong, which is certainly possible.
We have to remember that we’ve now got hot labor, hot inflation, and now a hot stock market again.
If anything worse happens with the Iranian conflict, we’ll have everything stacked against lower rates.
Are Tech Stocks Bouncing Back Bad for Mortgage Rates?
This seems to be the core argument at the moment.
There’s always something the market fixates on, which is a moving target, but lately it’s been tech stocks, namely the AI trade.
Prior to this, mortgage rates were obsessed with Iran (and oil prices), before that labor, and before that inflation.
They still care about all those things, but it seems tech is top of mind, and as such it’s the main issue to watch right now.
With tech stocks rebounding, it means less money flows into bonds, which results in higher yields, all else equal.
And that means mortgage rates move higher as well.
If investors get comfortable with AI stocks again, the safe-haven trade could fade and bonds may have to work harder to attract buyers.
Of course, if tech stumbles, which is entirely possible, we could see the opposite play out.
Perhaps it’s going to be choppy from here on out since mortgage rates seem to be most concerned with the stock market, which historically bounces around a lot.
So buckle up.
(photo: romana klee)
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