Decline in Manufacturing Sector Leads to Drop in Mortgage Rates

Investors reacted to the latest economic data demonstrating a decline in the manufacturing sector, leading to a drop in mortgage rates. The Institute for Supply Management (ISM) releases monthly indexes for both the Manufacturing and Non-Manufacturing sectors, and few reports have as much potential to impact interest rates aside from highly anticipated economic reports like the Consumer Price Index or the job report due on Friday.

Although the non-manufacturing index usually has a greater impact, today's report also had an effect. It indicated recessionary numbers, including reduced activity, orders, jobs, and prices. A weaker economy typically leads to lower interest rates. Additionally, the report revealed lower prices when the market is seeking signs of more subdued inflation.

Following the report's release, the bond market fluctuated from negative to positive territory. Consequently, rates dropped, with the value of bonds increasing inversely to their yield/rate. While US Treasuries saw a more significant change, mortgage-specific bonds also improved.

The average mortgage lender has thus been able to lower rates to levels marginally above the lows seen on March 23-24. To find rates any lower, we would need to go back to February 3rd. As today is April 3rd, we are very close to the two-month low point.

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Source: https://www.mortgagenewsdaily.com/markets/mortgage-rates-04032023