Another Big Improvement to Another 3 Week Low

Mortgage rates dropped again today, and at a much faster pace than yesterday's decline. Top tier 30yr fixed rates are now down to 7.33% for the average lender, a drop of more than 0.25% from the long-term highs seen just last week. There are a lot of moving parts behind the scenes so let's focus on what we can know or at least reasonably conclude.

Is this the big shift in rates we've been waiting for? The kind that sometimes follows sustained spikes to long-term highs?

While there's a chance the past 5 days COULD serve as the early indication of a broader rate recovery, it's far too soon to bank on it. The key reason is that much of the paradoxical strength of the past 2 days has been fueled by contagion concerns in the tech space.

What does the tech space have to do with rates? Is it more important than inflation and economic growth?

First off, the tech space and economic growth have a ton of overlap right now. If there's an ongoing pull-back in investor sentiment surrounding AI/tech stocks, and additional concern over certain companies (like Coreweave) having a contagion-like impact on other companies, all of that carries implications for economic data in the future. The other consideration is AI-related corporate debt. This has been a big driver of upward pressure in rates at times. If investor sentiment is souring on AI-related debt, it decreases the expectations for excess issuance of that debt which, in turn, helps more mainstream rates like Treasuries and mortgages.