Between Tuesday and Thursday, mortgage rates rose as much as during any three-day period in recent memory before settling back a bit on Friday's jobs data. Fourteen speeches from members of the Federal Reserve were partly to blame for the mortgage rate chaos, but several other factors played a part, too.
One of the biggest other factors last week was that multiple big-name investors were "margin-called".
Now, margin is a basic financial concept, but to do a good job explaining it requires a lot of numbers and math. So -- if you're curious -- visit Wikipedia for the complete run-down.
Or, just know that last week's margin calls forced the investors to sell their mortgage bond holdings into a falling mortgage bond market. This accelerated the mortgage bond markets freefall for home buyers and rateshoppers alike.
The extra supply from the margin calls created a stronger push downward on mortgage bond prices than markets would have seen without the margin calls.
This, of course, caused mortgage rates to rise faster than they would have without the margin calls, too.
Only after February's weak job numbers were reported Friday did mortgage rates recover. Overall, rates were higher on the week and -- at one point Thursday -- touched their highest levels in several months.
This week will be fairly light on data and lacking of Federal Reserve speakers. Therefore, watch for momentum trading to take hold.
The two data points to watch this week are:
- Thursday's Retail Sales data
- Friday's Consumer Price Index
Both are reasonable gauges of inflation in the U.S. economy and both are expected to show slowing from their previous readings. Strength will be interpreted as inflationary and should cause mortgage rates to rise.
(Image courtesy: The New York Times)
