Mortgage rates and their fluctuations are closely tied to investment activity. When investors feel confident about the economy, they’re more willing to invest in stocks rather than bonds. As bond prices fall accordingly, the Treasury yield goes up, as do mortgage rates.
The Bureau of Labor Statistics released the Employment Situation Survey on Friday, Aug. 4, which revealed an increase of 209,000 jobs in July. Though not as robust an increase as the one seen in June, this number was higher than many economists anticipated and successfully boosted confidence in the economy – and interest rates, according to NerdWallet.
One week later, the Consumer Price Index was announced to be slightly lower in July than it was in June. The reading of 1.7%, up 0.1% from June, wasn’t what economists wanted or anticipated to hear. The Federal Reserve’s systematic rate hikes over the past two years are intended to bring inflation to 2%, and as this measure continues to come in below target, investors may be discouraged.
Investors also look to headlines and current events to help them determine whether stocks or bonds will be most beneficial to them. This month, many people throughout the U.S. and globally have tuned into President Donald Trump’s rhetoric regarding North Korea.
Global uncertainty typically encourages investors to seek safety in the historically more stable bonds rather than stocks. As tensions grow between Trump and North Korean leader Kim Jong-Un, investors turned to bonds in August, moving their prices higher and pushing Treasury yields down, NerdWallet explained.
Later in the month, Trump traveled to Arizona where he touched on the topic of a U.S.-Mexico border wall in a speech. Discussions regarding the border wall have espoused numerous opinions and have been a source of tension between those who support the idea and those who oppose it. Regardless of personal opinions, this kind of volatility generally encourages investors to focus on bond purchases, continuing to push residential mortgage rates downward.
The coming month brings a Federal Reserve meeting and press conference, which will likely have an impact on mortgage rates, though whether it’ll push them up or pull them down remains to be seen.
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