Fed Fallout, Overdue Data Drive Rates Into and Out of Long-Term Lows

Mortgage rates ended the week largely where they began it, despite sharp movements following last Wednesday’s Federal Reserve announcement.

Markets interpreted last week’s announcement of a pause in future rate hikes as a signal that the Fed is more concerned about economic risks than they had previously let on. Rates subsequently spent the better part of the next two days falling back to one-year lows.

The partial U.S. government shutdown meant markets went much of January without the regular cadence of economic data releases. Now that the government has reopened, markets appear to be placing a large emphasis on these releases in an effort to get a handle on an uncertain economic outlook.

As a result, these releases have the potential to move the market sharply, and that’s exactly what occurred this week. Friday’s jobs, manufacturing and consumer sentiment data releases all came in stronger than expected, and boosted rates back up to their pre-Fed-announcement levels.

Rates have since stabilized, as the frequency of market-moving data releases slowed over the past few days. But it’s clear that the markets are attentively awaiting the economic data they missed during the shutdown.