Rate update: Glut of bonds could pressure mortgage rates

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By G. Steven Bray

Last week’s jobs report was another strong one, and mortgage rates responded as expected – quickly rising about an eighth of a point. But even with the rise, we’re still in the same range we’ve been in for the past several months, and rates have leveled out again to start the week.

The question now is will the jobs report give the Federal Reserve cover to start raising interest rates again at its Sep meeting. Interestingly, markets don’t think so. They might be right given that the Fed should be hesitant to do anything that could be perceived as influencing the election. Moreover, the economy still doesn’t seem to be running on all cylinders, and the Fed has to consider the backdrop of a weak global economy.

This week looks to be fairly quiet for rates. Not only are a lot of traders on holiday, but the only significant economic data is Fri’s retail sales report. The biggest source of rate pressure this week may be “supply.” The markets expect to see a lot of corporate bond issuance this week, and the Treasury has 3 scheduled auctions. It’s Econ 101. When you have excess bond supply, rates tend to rise.