Another Calm, Slightly Better Day For Rates, But All Bets Are Off Tomorrow

For the first time in nearly a month, the bond market (which dictates day to day mortgage rate movement) managed to string together two winning days in a row.   Sure, the outright level of the average 30yr fixed is still the 3rd highest in 20+ years, but when things have gone as poorly as they have for rates, we're happy to count any little victory. Today's victory was somewhat of a puzzler considering the stronger economic data.  The Fed has repeated its "data dependent" stance when it comes to monetary policy and the bond market has been very data dependent as a result.  That means rates tend to fall when the data is weak and rise when the data is strong. If there's an explanation for the paradox, it could be as simple as the bond market preferring to take a big picture approach after rates hit super-long-term highs on Tuesday.  Since then, there's been a very gentle trend back in the other direction.  Economic data has caused brief departures in logical directions, but the underlying trend returned shortly thereafter.  This could also be the market's way of hunkering down before the most important economic data of the week (and arguably, the month): The Employment Situation.  That's the official name for the big jobs report that gives us the important "nonfarm payrolls" (NFP) figure at 8:30am ET tomorrow morning.  The market expects roughly 170k jobs to be created.  If the actual number is much higher, rates will likely move higher as well.  If NFP is much lower, our 2 day trend of improvement has a very good chance of becoming a 3 day trend.  The bigger the departure from expectations, the bigger the potential swing in rates.