Mortgage Rates Rise Again on Mixed Economic Data

What's Happening Today

Stocks and Mortgage Bonds opened the day with a modest rebound after yesterday’s weakness, helped by softer economic data and news that the U.S. temporarily lifted sanctions on Russian oil, which pushed oil prices lower this morning. However, as the day progressed, market conditions deteriorated again and Mortgage Bonds gave back their early gains, leading mortgage rates to move slightly higher.

Even with weaker economic data, the bond market continues to struggle to sustain rallies as investors remain focused on inflation pressures and ongoing geopolitical developments.

GDP Shows Slower Economic Growth

• The second reading of Q4 GDP came in at 0.7% annualized growth
• This was roughly half of the initial estimate and well below expectations
• Federal government spending reduced GDP by about 1% due to the government shutdown
• Without that drag, GDP would have been closer to 1.7%
• Real final sales to private domestic purchasers rose 1.9%, about 0.5% lower than the first reading

Overall, the report shows economic growth slowed more than expected, though much of the weakness was tied to temporary government spending impacts.

Durable Goods Data Was Also Soft

• Durable Goods Orders for January were flat at 0%
• Markets had expected a 1.2% increase
• Core Durable Goods Orders were also flat at 0%
• Core shipments fell 0.1%, below expectations of a 0.4% increase

This softer business investment data suggests economic momentum may be slowing and could lead to further downward revisions to GDP.

PCE Inflation Largely In Line With Expectations

• Headline PCE rose 0.3% for the month
• Core PCE increased 0.4%
• Year-over-year headline inflation fell from 2.9% to 2.8%
• Core inflation rose slightly from 3% to 3.1%
• Healthcare increased 0.6% and contributed 0.12% to the monthly inflation reading
• Shelter rose 0.23% in the month and 3.21% year over year

Overall, inflation came in largely as expected, though rising oil prices in March could make future progress on inflation more difficult.

Labor Market Data Shows Ongoing Softness

• The JOLTS report showed job openings at 6.95 million, above the 6.7 million expected
• Job openings increased from the previous 6.5 million reading
• The hiring rate remained at 3.3%, near the lowest levels since 2013 when excluding the pandemic period
• The quits rate remained at 2%, near some of the lowest levels since 2014

While job openings improved slightly, hiring activity and worker mobility remain subdued, pointing to a cooling labor market.

Final Takeaway

Today’s economic data generally pointed toward slower economic growth and contained inflation pressures, which normally would support lower mortgage rates. While Mortgage Bonds initially improved this morning, the market could not maintain those gains and conditions weakened throughout the day, pushing mortgage rates slightly higher again.

As markets continue to weigh inflation risks, geopolitical developments, and mixed economic data, volatility in mortgage rates is likely to persist. For homebuyers, homeowners considering refinancing, and real estate professionals guiding clients through today’s market, staying informed on these shifting economic signals can help with better timing and financing decisions.