Mortgage rates managed to stay sideways today after beginning the week with a move higher yesterday.  This is a victory all things considered.

Rates take guidance from multiple sources.  When it comes to mortgages, the prices of mortgage-backed bonds are the key ingredients in determining rates.  While other factors had a massively outsized impact during the market volatility in March and April, mortgage rates have returned to their normal habit of following bond market cues.

If mortgages are taking cues from the broader bond market, where is the bond market getting its cues?  In the past few weeks, bonds are just as likely to be watching the stock market for guidance as anything else.  This is fairly logical considering both stocks and bonds have a stake in the nation's economic recovery and  the general push back against coronavirus impacts.  Progress pushes stock prices higher, and it also tends to put upward pressure on rates.  The big caveat here is that the correlation is best seen over short time horizons. 

In other words, mortgage bonds were indeed pointing toward lower rates when stocks were falling this morning and toward higher rates when stocks were rising in the afternoon.  But whereas the movement in stocks was impressively large, mortgage bond movement was relatively contained.  We certainly could see a few lenders begin the day with slightly higher rates tomorrow morning as a result of today's mortgage bond weakness, but the average lender remained in line with yesterday's levels as of 5pm Eastern time.