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There will probably be no way to avoid it. While rates may have been volatile in the last 2 weeks, they are prone to much higher volatility in the coming 2 weeks.
I am purposely refraining from commenting on the first few weeks of February as it is not certain whether the upcoming movement will be bigger than this. From February 2 to February 15, the average 30-year fixed rate increased by a whopping 0.75%. Since then, we have moved up and over 7% as the market awaits several highly consequential economic reports.
This brings us to the rationale behind the call for high volatility. The big jobs report coming on Friday and the Consumer Price Index (CPI) on deck next week are the two most relevant economic reports out now, month in and month out. Comments from Fed Chair Powell this week reiterated the possibility that the Fed could increase the pace of its rate hikes if the data is hot enough.
As always, financial markets will adjust to that possibility soon after the data is released. In other words, traders won’t wait for the Fed to hike by a really large amount before selling the bond. When traders sell bonds, rates go up, all other things being equal. That means mortgage rates will move sharply higher if Friday’s jobs report is stronger than expected.
Conversely, if the report is weak, rates will likely recover a larger amount than in their recent winning days. The movement seen so far this week is more of a placeholder for contrast. Today got worse, with the average lender drifting slightly more into the low 7% range for the top tier 30yr fixed scenarios.
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