Squabbles, Shutdown and Scarce Stats Leave Rates Flat Again

Mortgage rates were flat again this week, despite fluctuations caused by geo-political uncertainty and unexpectedly strong manufacturing data.

Heading into a holiday weekend, it’s common for mortgage lenders to price rates conservatively, and that was indeed the case heading into the Martin Luther King Jr. Day holiday. However, the defensive pricing we saw late last week far exceeded what we would typically expect, as rates took a sharp turn upward into the weekend before retreating on Tuesday.

With Washington’s doors still closed, markets remain reliant on private-sector and international data in order to gauge the strength of the U.S. economy. No factor played a larger role in defining rate movements this week than the ongoing trade tensions between the U.S. and China. Rates rose early in the week on reports that U.S. Treasury officials were debating whether to scale back tariffs on Chinese imports, although they swiftly retreated due to elevated concerns about the trade war’s impact on the global economy.

Encouraging U.S. regional manufacturing data released earlier in the week helped prop rates up and, for the moment, ease concerns about slowdowns in the sector. However, much like last week, in the absence of most economic data releases, it will remain particularly difficult for monetary policymakers to set expectations until the government re-opens. As a result, markets are likely expecting this volatile yet net-sideways trend to continue until Washington heads back to work.